MARKET TALK: Only Amateur Investors Buying BP Stock -Deutsche

18th Jun 2010 16:38

[Dow Jones] There are a "tiny heroic few" investors currently buying BP PLC's (BP) stock, regardless of the uncertainties surrounding the companies' liability on the massive oil spill in the Gulf of Mexico. They are "that worrisome combination of Wall Street professional/amateur investor," with an idea of "highest risk appetitive," says Paul Sankey, an analyst at Deutsche Bank, in a note to clients. By contrast, professional investors do not want to own shares of BP, even if they are sharply undervalued, because there is not coherent valuation argument. Simply adding up a best-guess of the costs, fines and liabilities, comparing them to the lost BP market cap and concluding the stock is a BUY is naive, Sankey says. Reinvesting cash flow is the biggest challenge to an oil company and assessing that eventual lost opportunity is now in the hands of journalists, politicians, and lawyers, which is a valuation nightmare, he adds. BP shares have lost about 30% in value since April 20, the day Transocean Ltd's (RIG) Deepwater Horizon rig, which was leased by BP, exploded and sank two days latter. The blast unleashed the largest spill in US history, which is still threatening the Gulf's coast. BP's shares are trading 0.76% down $31.46 Contact us in New York at 212-416-2138 or [email protected] (END) Dow Jones Newswires June 18, 2010 11:38 ET (15:38 GMT)