Monday, 21 June 2010

Should You Buy BP Stock

With the environmental disaster that's happening in the U.S at the moment there's been a lot of talk regarding BP's share price. It's almost halved in value since all the trouble started. So is this an opportunity to create something good out of the catastrophe and actually make some money from it? You could always give some of the money back to the environmental agencies involved in the cleanup if it helps to clear your conscience.

Before you rush off to log in to your broker account and buy a 100 in BP stock, have you done any research to decide if it's actually a good buy. Are you simply getting caught up in the media hysteria again. I've done it myself. I sit and watch tv all day and then I'm convinced that I must buy x amount of stock in that company because Bobby Bigshot on CNN told me. I feel like that after some of those infomercials too but maybe that's just me. The key is to keep your head. Always do your research and don't get caught up in the media hype.

In any case, lets look at BP. They're going to have to pay back billions of dollars to the U.S government. A final figure hasn't been agreed yet. You therefor have no way to predict what kind of profit they're going to make in say the next 5 years. Any profit they do make is going to end up going straight back to the U.S government to pay for the mess they've caused in the south. That for me means I won't be picking up the bargain stock while it's low. Don't let that swat you one way or the other though.

You might think it's worth the risk. You've done your analysis and can't see a downside to this. If not then great, go for it. I just don't like taking any risks with my money. I worked to hard to get it in the first place! It's certainly something I'll be keeping a close eye on in the future though. It'll be really interesting to see how it affects the share price of the other big oil companies operating in the region. Will they go up as a result of BP's downfall? Or is the slick back stink they've lot going to stain the other oil companies and force investors away from backing this type of area with their cold hard cash? Time will tell, lets save the birds first and worry about all this later.