BP: A HYP and Value Play

I have selected BP as a component in both my HYP and Value portfolio. In recent times, BP has been hit by a great deal of negative sentiment following problems in Texas and Alaska and subsequent fallout over its safety record. As a result of this the share price has fallen and so BP presents itself as an ideal crisis play.

In value terms, BP is on a PE (defined here) of around 11 and a yield of just under 4% which compares favourably with other Big Oil companies and also when compared to its historic ratios.  In short, the share has been harshly delt with and I expect it to recover back to normal levels.

I have also added BP to my HYP as it is very unusual to get an oil company yielding so much and so I thought I would take advantage of this well covered yeild (2.8 x) and include it in my portfolio. My feeling is that as oil is in short supply (or will be some day) then BP can only benifit from its rising price and long term this will be a good share to hold.

It is also worth considering that BP is at the same price it was around 2002 despite the fact that it has been buying back billions of pounds worth of its own shares. These buy backs haven’t had much of an impact on its share price, maybe at some point the market will cotton onto this fact and re-rate the share accordingly.