The resulting oil leak was gushing around 53 000 barrels (!) of oil per day into the Gulf of Mexico and the Americans were hopping mad. BP suddenly became 'British Petroleum' and heads were going to roll. Some people even criticised Obama for not doing enough, as if he should put on some diving gear himself, swim down to the leak and plug it with his own bare hands! The simple unpleasent truth was BP probably best placed to fix the problem themselves, although it did take 5 long months.
It felt like the disaster was in the news every single day with footage of the burning platform as well as dying oil soaked birds being washed up on the local shores. Local businesses and economies were being devastated.
It seems amazing to me now but the US even threatened to take legal action to stop BP's dividened. The compnay took action mid-June and announced the dividened would be stopped being paid out to shareholders. The share price plummeted as investors and many a pension fund who wanted the dividened, sold, sold, sold!
Just before the disaster the share price reached a peak of around $60 and eventually fell over 50% during the next couple of months. I was only just becoming interested in investing/trading shares and of course with all the news BP came to my attention.
The way I saw it (rightly or wrongly) BP was a large cap oil company selling a product that everbody needs and wants, one little oil well wasn't going to send them into bankruptcy. Although terrible, the disaster would pass over. People would then soon forget about it and BP would go back to selling oil and making money. The news hyperbole had helped drive an over reaction in the sale of shares.
Interstingly looking at the chart above I managed somehow to buy near the bottom, which was just pure luck! I can't remember if I set myself a stop loss, proabaly not so I'm not sure what my exit plan was. Ride it to the bottom!
The following graph shows the price and book value of BP over a similar time period. I was completely unware of it at the time but the share price was very near the book value of the company.
Perhaps this is benefit of hindsight but the price action looks like it fell very quicly until it reached a fundamental value, in this case its book, and that is where the value investors stepped in. Perhaps some people hoped it would fall even further but it bounced around here and never came back.
So now I had my first shares that were starting to go up in price. Again, I don't remember what the profit target was, I suspect there wasn't one really. Probably a simple 'Buffet' style 'buy and hold forever'! Anyway, perhaps I got bored or scared but I sold them in December for $43.37, a tiday profit of $10.87, 33%, a lot better than I remember actually.
Not much has happened to the share price since then, as it is actually around where I sold them nearly two years ago. Somehow I managed to caputure a significant portion of the trough to peak move!
BP have since reinstated their dividened and are paying $0.48, which would have been 5.9% yield on cost ($32.5), so perhaps I should have held on. But there is a sting in this tale of 'beginners luck', as the actual profit I made was far less due to fluctutations in currency exchange rates and transaction costs.
It's actually these latter two negative parts that have stuck with me the most. I am still reluctant to trade shares in foreign currencies, its dam frustrating seeing a shares price go up but the strength of the dollar go down! I now always calcuate the impact of transactions costs on my trades and would never trade such a small amount again.
How about you? Do you have any beginners luck stories you have learnt from?
