July 19, 2010 – Take the Money and Run from BP

Featured Trades: (BP)


3) Take the Money and Run from BP. If you followed my advice to buy BP at $29 on June 17 (click here for my piece), please sell it. It peaked at $40 yesterday. Take the easy money and run. I’ve never seen a better opportunity to buy the rumor and sell the news. The long awaited announcement that the April 22 blowout in the Gulf of Mexico was at long last capped has sent the stock on a tear. This limits the pariah firm’s liability to $50 billion max, down from estimates that ran as high as several hundred billion dollars only days ago. The final answer won’t be in until hell freezes over. Sure, if you end the moratorium on offshore drilling, get it back up to its old multiple, tack on higher oil prices, and take in $20 billion in asset sales or equity capital raises, you might be able to squeeze another $20 out of the trade. But do you really want to hang around and run the market risk? Or the dilution risk? BP now has 43,000 locals working to clean up the spill. Would you want to meet that payroll? Don’t be the pig that gets slaughtered. A profit of 38%, some 76% if you used margin, and over 150% if you played the options is better than a poke in the eye with a sharp stick, especially in this miserable environment.

BP Amoco PLC


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