The FTSE 100 slipped on renewed tensions this morning (13 April). But the real issue isn’t why it’s falling — it’s what’s suddenly become cheaper.
A contrarian opportunity?
Recent trading data from AJ Bell suggests many investors have been taking profits in BP (LSE: BP.) after its strong run. That’s understandable.
But today tells a slightly different story. While the FTSE 100 has slipped, BP shares have been pushing higher as oil prices rebound on renewed tensions.
That divergence is telling. Short-term sentiment may be shifting, but the underlying earnings story remains firmly tied to energy markets that are strengthening again.
For me, the key point isn’t whether the rally has run out of steam — but whether this is simply another pause before the next leg higher.
The bigger picture hasn’t weakened
While short-term sentiment continues to swing, the underlying investment case for BP hasn’t deteriorated — if anything, I think it has strengthened.
The company has reoriented its strategy back towards higher-return upstream oil and gas, improving the quality and visibility of future cash flows. At the same time, portfolio simplification is steadily reducing complexity and improving capital efficiency.
That matters because the oil major is no longer trying to be everything at once. It’s increasingly focused on areas where returns are structurally higher and more predictable across the cycle.
Put simply, the business is becoming more tightly aligned to the very drivers that move its earnings — not less.
For long-term investors, that shifts the debate away from short-term oil moves and towards the durability of the company’s cash-generating capacity over time.
The main short-term risk for BP is a renewed fall in oil prices if geopolitical tensions ease or global growth slows, which would quickly hit cash flow and sentiment.
On the other side of the cycle, sustained higher prices could prompt governments to impose additional taxes or windfall levies on energy companies, potentially limiting returns even as conditions strengthen.
Nevertheless, with exceptional cash generation, I’ve been adding to my position recently.
Why the market may be missing it
One interesting signal is that Aviva (LSE: AV.) hasn’t featured heavily in recent buy or sell data from AJ Bell, suggesting investor attention may be fading after a strong 2025 run.
But that may say more about sentiment than fundamentals.
What the market may be overlooking is how much the group’s earnings mix has already shifted. It’s no longer reliant on a single cyclical insurance engine, with a growing share of profits now coming from wealth, pensions, and fee-based businesses that generate more stable cash flows.
That matters because it changes the dividend story. It’s increasingly supported by recurring, capital-light earnings rather than pure insurance cycles.
Cash generation remains strong, capital returns are rising, and management continues to upgrade targets after early delivery of previous goals.
Of course, risks remain. A weaker economic backdrop or rising inflation could hit bond valuations in its portfolio, putting pressure on capital positions and returns.
Aviva has already surprised the market once. With a more capital-light model now embedded, it may not be the last time. For long-term investors, the market may still be underestimating the compounding under way. That’s why I view the stock as one to consider.
