I’ll believe it when I see it, but wouldn’t it be pretty to think so?
BP (NYSE: BP) is having a rough year. After claiming responsibility for one the worst oil spills in U.S. history, and accepting costly penalties for the disaster, BP managers may now face manslaughter charges.
Prosecutors are considering whether the decisions managers made prior to the explosion leaving 11 workers dead are grounds for manslaughter charges.
BP closed at $46.04 Monday and is now at $45.12 in pre-market trading. Coupled with the manslaughter report, BP must also contend with a downgrade from “hold” to “sell,” by Collins Stewart.
Due to the oil well explosion in 2010, BP’s share price lost half its value from April to late June. It has since begun to slowly recover to some extent, but the challenges BP faces in the wake of the oil spill are clearly plentiful.
The contrarian investor may consider now as a reasonable buying opportunity. BP has clearly been beaten down in the last year and performed significantly worse than competitors Exxon Mobil (NYSE: XOM) and Chevron (NYSE: CVX). As the fine for the oil spill has yet to be levied, it is possible that it will drive the price down further. BP has also paid businesses that purportedly lost revenue due to the effects of the spill.
When the aftereffects of the oil spill disaster are behind us, BP has the opportunity to grow immensely from the lows at which it is currently trading. Can BP recover from a blow like this? BP will have to pay out many billions in fines and other costs related to the spill in the coming months and years. If the investor takes a long position in BP, it may be quite some time before he or she reaps a profit from the investment.