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Sell BP - BP (BP.)
28/4/2010
(119264)
MW10Ap29 bp
Sell BP
It might sound like panic, and it might indeed be panic, but after listening to the local news on the Gulf Coast of Florida, it seems sensible to suggest that anyone who has the slightest concern about it should sell BP (BP.)
The stock has been recommended here several times some time ago as a safe high yield stock. At 625p, it is about 100p above the recommended prices, and shows a still greater gain for those who followed the likes of kenmitch in being braver and buying when it was way below 500p.
All of the usual stuff about buying on the rumour, selling on the fact applies – except that after watching the local news here, there are suggestions that the oil spill disaster might be much worse than so far announced. I say ‘might’ and do not pretend to know the full situation. It is clear that no-one does. Maybe more than 200,000 gallons a day is being released – though it could be as little as 40,000 gallons.
In the US this is getting major attention. Even if BP manages to limit the damage – there are massive efforts in train, including burning the oil on the sea – the potential legal liabilities which could follow might be massive. Never mind the massive direct costs – what is involved in stemming the leak and containing the oil, plus the costs of a rig sitting at the bottom of a very deep ocean – the damage to Louisiana shores and possibly to beaches in Florida could be enormous.
And the political fall-out is building. BP is going to be feeling very defensive in the USA for a long time. It has yet to recover from a disastrous US accident previously.
BP is a massively profitable company with enormous resources, but quite where the impact of this disaster will end is not clear. Once again, it might be seer panic to suggest selling the shares, which actually rose 25p on Wednesday – but better safe than sorry. There are other major companies to buy without such a cloud gathering over them.
I am writing this late at night, US time, so that it will be available to subscribers early on Thursday morning, UK time.
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