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3:53 pm
April 24, 2012
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krackerjack121
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HI Jae,
I did not apply any specific numbers other then my buy point which was once the dividend yield hit 10% I hit the purchase button. I reviewed over the FCF numbers and then looked at how profitable the company was and still is albeit it to a smaller degree. I just could not fathom in any circumstance how they would go out of business. Another factor for me was the fact that BP made up something like 12% of the dividend payments on the London Stock Exchange and I thought that worse come to worse the British government may decide that this business was to big to fail. Even though that I don't agree with that sentiment. But it was definately a little nerve wracking at times, but in the end I knew that they would not fail.
Rocky
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2:28 pm
April 24, 2012
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Jae Jun
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I think you nailed it.
Basically, look at the headline, estimate the expected losses, see whether the company can survive despite the losses and then make a decision based on that.
Did you assign any particular scenarios before you invested?
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1:54 pm
April 23, 2012
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krackerjack121
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Just to comment on the BP stock. This has been a good stock for me. I purchased it just under $33.00. During the middle of the spill. It was my first stock purchase and then ensuing first sale. I made around 50% on it. For me, when I decided to purchase it. I looked at the FCF and the company made just way to much money to be put out of business. Did I like what happened in the Gulf? Of course, not, but since everyone was willing to throw the company out with the bath water. (Sorry bad paraphrased cliche) I thought I should make some money off of it. They have actually stepped up to the plate and put the money where there mouth is and been responsible for the costs involved with the clean up.
I almost bought them again last fall, but they did not fall into my trigger point range so, I missed it by a buck or so. As much as they have a lot of bad press around them. They are still profitable and making decisions to try and better there company for future positioning. I would value them right now somewhere around 43-48 dollars.
Rocky
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12:58 pm
April 23, 2012
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Jae Jun
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Graeme said:
Following in this vein, hopefully this new Walmart bribery story hammers the stock even further. (Down 4% today)
Wouldn't the Mexican Walmart be better?
PINK:WMMVY
Down 13% today
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9:10 am
April 23, 2012
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somrh
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Is "panic headline investing" just another form of taking on downside risk (I'm referring to the GMO article that compared hedge fund returns to a put writing strategy.)
On that note, perhaps CRESY now fits the bill… (See this thread)
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8:26 am
April 23, 2012
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Graeme
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For sure Tilson frequents these boards. Where do you think he generates his ideas!? 
Following in this vein, hopefully this new Walmart bribery story hammers the stock even further. (Down 4% today)
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5:05 pm
April 22, 2012
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Jae Jun
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Whitney Tilson must have read this post.
He talks about BP and "Panic headilne investing"
http://www.gurufocus.com/news/…..-investing
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5:12 am
April 20, 2012
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somrh
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Jae Jun said:
I believe it has more than just being a contrarian. First have to think about how big the damage is and whether the company can survive it.
That seems to sum it up for me. I frankly didn't feel like I had any "edge" in determining what the damage might be over anyone else. And I had heard people (who may, also, not had any edge either but what do I know) claim the damage could be enough to tank the company. Not that I would expect BP to go under per se, but that wouldn't rule out equity stakeholders wouldn't be wiped out or severly diluted.
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4:12 pm
April 19, 2012
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Jae Jun
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wow has it been 2 years already??
I believe it has more than just being a contrarian. First have to think about how big the damage is and whether the company can survive it. This is more difficult than it sounds because the media blows it out of proportion.
Thinking about it, the media creates fear to drive ratings, and fear is short term.
So if we could ignore fear, that would make the investment decision much clearer.
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7:31 am
April 18, 2012
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Graeme
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So what can we learn 2 years later? We were having this discussion when BP was hovering around $24 and it's about doubled since then. Were our fears unfounded? Was it cheap enough that the concern that they would be "paying for it" was minor compared to the greatly reduced price? Should we have trusted our first instinct which was "this is a disaster and eveyrone is jumping ship. I should buy."
I think this is the most important part of investing–the looking at things years later and asking if our decision making process was sound. Thoughts?
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9:50 pm
June 29, 2010
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Jae Jun
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the argument against that is that BP will pay for it over many many years.
Still far too many variables involved that could turn sideways. "Uncertainty" indicates that the situation is somewhat predictable or there are possible scenarios that things could work out.
In BP's case, anything can happen beyond the control of the company. BP may think they have the situation under control but then something else could be thrown at them and whack em in the side of the head.
Just too much risk for me.
Prefer safer bets. Lots of companies are getting cheaper each day.
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8:55 pm
June 27, 2010
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zehua
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krackerjack121 said:
Zehua,
I haven't heard anything about a dividend cut and I just checked out BP's webpage. There was no indication of a cut on the homepage. I believe the reason for BP's drop in price was because of the failure over the weekend to cap the well. People are scared and running away from BP. As a result, I happen to think now might be a great time to buy. Alot of times companies that pay out dividends don't want to have to cut them because like you said, it will drive people away from the company. I could see them not raising it and just leaving it as is for a while. But I still think that this is looking like a pretty good opportunity.
Rocky
krackerjack121 said:
Zehua,
I haven't heard anything about a dividend cut and I just checked out BP's webpage. There was no indication of a cut on the homepage. I believe the reason for BP's drop in price was because of the failure over the weekend to cap the well. People are scared and running away from BP. As a result, I happen to think now might be a great time to buy. Alot of times companies that pay out dividends don't want to have to cut them because like you said, it will drive people away from the company. I could see them not raising it and just leaving it as is for a while. But I still think that this is looking like a pretty good opportunity.
Rocky
Rocky, the key problem here is to estimate the cost of this disaster. Right now the oil is still leaking, and there is no way to know how much will this cost. At the minimum we have to wait till the oil stopped leaking before buying even one share.
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5:46 pm
June 2, 2010
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krackerjack121
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Zehua,
I haven't heard anything about a dividend cut and I just checked out BP's webpage. There was no indication of a cut on the homepage. I believe the reason for BP's drop in price was because of the failure over the weekend to cap the well. People are scared and running away from BP. As a result, I happen to think now might be a great time to buy. Alot of times companies that pay out dividends don't want to have to cut them because like you said, it will drive people away from the company. I could see them not raising it and just leaving it as is for a while. But I still think that this is looking like a pretty good opportunity.
Rocky
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5:03 pm
June 2, 2010
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zehua
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Jae Jun said:
My concern about BP is the implications of how much they will have to pay up.
Price follows value, and with what is going on, I am confident that their FCF will drop as they continue to try and rectify the situation and the following consequences. BP is trying to blame RIG but I doubt the government will care.
With drops in FCF, so too does the value.
I prefer drillers if I had to choose. They have all been hit pretty hard.
I am really unfamiliar with this industry, but I am trying to learn this industry as well. Is there any introduction articles? For example, you mentioned drillers, so do they just drill the wells for the oil producers? BOLT is something like an explorer?
To krackerjack121: I think BP just anounced cut of dividend, and that is why their price droped to $36. At least that is what I read on google finance.
Actually, that is a good thing. Fat dividends always set a price floor, no matter how shaky the company is. I have seen a company that keeps reporting positive net income, but their FCF is negative, so they have to borrow to pay the fat dividends, but their stock price is always high.
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9:19 am
June 2, 2010
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Jae Jun
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My concern about BP is the implications of how much they will have to pay up.
Price follows value, and with what is going on, I am confident that their FCF will drop as they continue to try and rectify the situation and the following consequences. BP is trying to blame RIG but I doubt the government will care.
With drops in FCF, so too does the value.
I prefer drillers if I had to choose. They have all been hit pretty hard.
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2:41 pm
June 1, 2010
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krackerjack121
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| Member | posts 69 |
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I have been thinking quite seriously about purchasing some BP stock. WIth the current Gulf of Mexico probelms this has left the stock in rough shape. I still think that they have enough money that in the long term the company will be fine, but in the short term people are not very happy and they are scared of them. THey are yeilding over 7 percent on there dividend and have had positive free cash flows for over 10 years (according to Morningstar). Possibility for a dividend cut (maybe) but I don't believe that they will. They have consistenly raised there dividend for the last 17 years or so. So I would be inclined to think that they don't want to cut that. Although, if I am correct, it may lead to an even better buying opportunity. So who knows.
Thoughts?
Why wouldn't you buy them right now?
Rocky
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