(Idea) Is BP A Buy Now?
Editor's Note: We view BP as a buy candidate due to Elliott Management's involvement and the possibility of a complete management overhaul. We will look for an opportune time to add BP to the portfolio.
By: Jon Costello
In our initial report on BP (BP), we recommended that investors avoid the name due to the entrenched barriers we believed stood in the way of sustainably higher returns for shareholders. BP was too focused on low-returning renewable energy projects. These projects burnished the company’s environmental credentials, but they also ensured its continued underperformance.
Well, a lot has changed at BP since we published that article on February 20. A major BP shareholder, Elliott Management, became more vocal about the company’s strategic direction and recently increased its stake in BP to over 5%.
Elliott was no doubt a leading factor behind the positive changes now underway at BP.
Over the past few months, the company outlined new goals and the steps it plans to take to achieve them. These goals are realistic for BP, and I believe it will achieve them. However, any such success isn’t priced into its stock. In fact, even if BP only partially achieves its new goals, I expect its shares to perform well from their current price over the coming years.
Given the upside I see from BP’s successful execution, I’m changing my stance on the name to a “buy” at the current stock price of $27.50.