Can I Pick the Winners or What!?
Update:
Adding fuel to what I said below, CNN is running with this story.
Original post:
And you have to know that I am talking about BP Prudhoe Bay Royalty trust (BPT). After years of price appreciation and a great dividend, we get hit with pipeline corrosion and a shutdown while more than two thirds (16 miles) of the 22 mile pipeline is replaced. BP officials state that repairs are almost underway, pipe and welders are being delivered to the site, and the outtage could only last a few months.
That is what we have all heard and read about at this point.
Personally, I would love to suggest NOW as a buying opportunity for BPT, but I think that may be too hasty. For those of you who love volatility, then by all means, jump in now and play the short term rebound. However, I am looking for this stock to fall again in the next few weeks or few months. Why? All of the subtext indicates that there will be a second announcement - containing more bad news. Any combination of the following:
Would I select BPT for my model portfolio? You bet... but not at the moment. It will go into my probation list while we wait for news. Assuming we will get hit with another gut punch if any of the above comes true, I would consider another large price drop as a potential buying opportunity.
Disclosure: I do not currently own BPT.
Adding fuel to what I said below, CNN is running with this story.
Original post:
And you have to know that I am talking about BP Prudhoe Bay Royalty trust (BPT). After years of price appreciation and a great dividend, we get hit with pipeline corrosion and a shutdown while more than two thirds (16 miles) of the 22 mile pipeline is replaced. BP officials state that repairs are almost underway, pipe and welders are being delivered to the site, and the outtage could only last a few months.
That is what we have all heard and read about at this point.
Personally, I would love to suggest NOW as a buying opportunity for BPT, but I think that may be too hasty. For those of you who love volatility, then by all means, jump in now and play the short term rebound. However, I am looking for this stock to fall again in the next few weeks or few months. Why? All of the subtext indicates that there will be a second announcement - containing more bad news. Any combination of the following:
- The repairs are going to take longer than expected (which means zero production, $0 dividend for a longer time period).
- There will be lawsuits or simply mention of lawsuits (the rumor mill has already started here) against BP for neglience in the area of proper diagnostics and preventative measures in the area of pipeline maintenance. Could that spread to others in the industry?
- And rounding out this trifecta of pain - oil spills / environmental issues. This region is always a hotbed for environmental protection, especially if big oil has to replace large sections of pipe quickly.
Would I select BPT for my model portfolio? You bet... but not at the moment. It will go into my probation list while we wait for news. Assuming we will get hit with another gut punch if any of the above comes true, I would consider another large price drop as a potential buying opportunity.
Disclosure: I do not currently own BPT.
posted by Nate at 8:48 AM
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