I’m sure that everyone is familiar with the oil company, BP even before the recent oil spill disaster in the Gulf of Mexico, which has been making the headlines beside the World Cup. The oil spill disaster has and will cause BP to pay billions in damages. With such a consequence, it is not surprising that the share price has taken a huge tumble from its recent peak of around $60 to its current price of around $28.
From a general point of view, without doing an in-depth analysis of the financials and business model of BP, I would say that the market is short-sighted with regards to the share price of this company. Why ? The main question for me will be, is the long term profitability of this BP being threatened ?
{ 4 comments… read them below or add one }
Yes, probably BP will still be around for a long time but current shareholders’ interest may be greatly diluted in near future so some choose to reduce exposure or exit completely. Not sure are they short-sighted of this company specific risk.
Personally i do not think they are short sighted.
If we want to invest, we need to understand 2 points
1) Market is always right.
2) Go against the crowd is never a good thing
I beg to differ.
1) Market is not always right. It may be mostly right in the short term but it can go way off for the long term.
2) Going against the crowd can be right thing to do if you have done your research and homework.
Portfolio management is equally important so some investors may want to reduce their portfolio exposure to this company specific.
Understand that major shareholders in ?BP are pension funds who have long-sighted view and why they choose to reduce? Blur vision ahead?