Other Candid sites

Candid Financial Advice
Financial advice for a fraction of the usual cost.

Compare Fund Platforms
The UK's only fund platform comparison site for private investors.

Calculator over 80 Calculators!

Covering almost all your money needs - use them.

Investment Rate

Calculator What annual investment return would you need to earn to reach a target sum? Use this calculator to find out.

Random Jargon

Distressed Securities Specialist

An investment (hedge fund) strategy where managers seek out companies that are in big trouble, often on the verge of bankruptcy, in the hope they can improve matters and make a profit.

Ask Justin

Ask Justin

| Printable version | A A A |

Sell BP Shares?

Investment | Shares Helpful? 23

Asked by Franj, submitted 10 June 2010.

Open Quote I have held onto my BP shares during recent weeks and - with the threat of additional costs and calamitous legal actions as well as potentially no dividend - am I wise to keep hold of them having lost 50% value? Or is this the time to buy some more? I saw your answer on 7.6.10 on BP.....but that now seems an age ago?End Quote

Answered by Justin on 10 June 2010

No-one knows how much compensation BP will end up paying so the share price is incredibly sensitive to any hints, good or bad. President Obama’s aggressive stance has continued to hurt the share price as it suggests the compensation bill could be very high. But it would probably only take a comment or two that suggests a softening in Obama’s stance to send the share price upwards.

My gut feeling is that BP will likely be fine longer term and the shares are probably underpriced at the moment. However, buying now is not for the faint-hearted, as short term volatility is likely to remain very high. You could find yourself losing 10-20% in no time at all if there’s more negative news flow.

There is a risk of take-over bids, if other companies try to capitalise on BP’s predicament. This would be bad news for BP shareholders as it could lead to selling out at a very unattractive price. However, while not out of the question, I’m less convinced there will be a successful bid unless BP’s position deteriorates further.

I’d be tempted to sit tight and ride out the storm if you can stomach the volatility. And while there’s a reasonable argument for buying BP shares at present, only do so if you’re feeling very brave.

Please note this answer does not constitute a recommendation or financial advice and should not be relied upon when making specific investment or other financial decisions. You should always undertake your own research into whether a product or service is appropriate for your needs and, if necessary, use a qualified professional adviser.

If you found this answer helpful, please add your vote by clicking here.

Readers' Comments (0) - To post a comment please register or login .