Fool's Eye View

[ August 8, 2000 ]

Halfway at BP Amoco

By Stuart Watson (TMFTiger)

Great Titchfield Street, London -- BP Amoco (LSE: BP.) is the UK's second largest company with a market value of £135b. However, as far as retail investors are concerned, it is seems to be off the radar screen. Look at our discussion board on the company. It was opened back in October 1998 but since then has only received an average of two postings per week. When we looked the most popular stock in Fool's portfolios last month BP did a little better but still only managed to come in at number thirty, just ahead of Geo Interactive Media (LSE: GIM).

Why is it so unpopular?

Well, do you understand oil stocks? I would argue that the vast majority of private investors just take one look at the accounts of such companies and really can't be bothered to look much further. There may be lots of lovely comparatives to help the industry analysts but the ordinary punter looking for fundamental information is not well served. We can see that the company has net debt of £9b, but standard information relating to the profit and loss account can be best be described as muddled.

Added to that is the big unknown, namely the price of oil. It has risen sharply over the last year and this has had a dramatic effect on BP's results. Exactly how much is difficult to ascertain as BP has also its cut costs following its £22b acquisition of Arco. So is the current price of oil, and hence BP's profits, sustainable in the long run? For the last three months operating profits were £2.4b, and BP has said that it is targeting double-digit earnings growth regardless of oil price movements. But until the day comes when I feel happy that I fully understand oil stocks, I think I'll limit my exposure to a passive holding via an index tracker.

Update those portfolios

For those of you that do have BP in your portfolios, you may have noticed that the price hasn't been appearing for the past few days. The reason for this is quite simple. The company's EPIC changed from 'BPA' to 'BP.' following its announcement that it intends to have just BP as its main brand. You'll need to update your portfolio for this change. This message tells you how.

Where Next?

BP discussion board | website