BP shares (LSE:BP) could be the story of the last week. Why? Well, an investment broker AJ Bell publishes information about the best purchases and sales on its platform every week. This gives us insight into what stocks UK investors are diving into or running away from. The main object of sale on the investment platform is an oil company, and also with some distance.
Over the last week, over 4.6% of all sales transactions concerned shares of the former British Petroleum company. That’s several times more sales than other stocks in the top ten Rolls-Royce Or Microsoft. What’s going on here? Why is everyone selling BP stock? Can panic be a great buying opportunity?
Why
The first thing to note is that BP’s share price is rising. The consequences of the emerging conflict in the Middle East sent oil prices skyrocketing and increased the value of the oil company’s shares by 40%. It’s natural that investors whose positions have seen gains in recent months may see profit-taking.
The other main reason is simply the volatility that BP stock is currently experiencing. While they are most commonly sold on AJ Bell (and to some extent), they are also most frequently purchased. This suggests that day traders may think that all the ups and downs may be a good time to take profits.
On A motley foolHowever, we do not recommend buying shares in the morning and selling in the afternoon. We like to buy for the long term, preferably 10 years or more. I like this quote from Warren Buffett on this topic: “My favorite holding period is forever.”
So the real question is: Is BP stock a good buy over the long term?
Purchase?
The first thing to note is that there is still value on offer here. A forward price-to-earnings ratio of around 14 is still below par FTSE100 average. The dividend yield of 4.08% is also above the Footsie. Both numbers are likely to become more attractive in the compact term if earnings rise due to higher oil prices.
When looking at the Iran conflict, it can be viewed in two different ways. Firstly, it has become very clear how much our lives still depend on black things. Energy is the lifeblood of our current, globalized society, which suggests, whether we like it or not, that oil companies like BP are not going anywhere. The tardy Charlie Munger said we will need oil for another 200 years.
The counterpoint is that this could be a kick in the back to get stern about green energy. More investment in infrastructure and perhaps more regulations on dirtier energy sources could mean BP will have a hard time.
In balance? Nobody can predict the future. However, I remembered that for decades they have been saying that tobacco is dying out. And what was the highest rate of return for FTSE 100 stocks among the companies included in the index at its inception in 1984? Correct. British-American tobacco…
