BP shares (LSE: BP) might be the story of the last week. Why? Well, the investment broker AJ Bell publishes the top buys and sells on its platform on a weekly basis. This gives us an insight into what stocks British investors are ploughing into – or fleeing away from. The oil major is the number one sell across the investment platform and by some distance too.
Over the last week, over 4.6% of all sell trades were for shares in the old British Petroleum. That’s several times as many sell trades as other stocks that made it in the top 10 like Rolls-Royce or Microsoft. What’s going on here? Why is everyone selling BP shares? And could the panic be a brilliant buying opportunity?
The why
The first thing to point out here is that the BP share price has been flying. The consequences of the erupting conflict in the Middle East have sent oil prices into orbit and raised the value of the oil firm’s shares by 40%. It’s only natural we might see some profit-taking from investors who have seen their positions balloon in recent months.
Another primary reason is simply the volatility that BP shares are experiencing at the moment. While they are the most sold on AJ Bell (and by some distance), they are the most bought as well. This suggests that day traders might be thinking all the ups and downs could be a good time to eke out some gains.
At The Motley Fool, however, we don’t espouse buying stocks in the morning and then selling in the afternoon. We like to buy for the long-term, ideally 10 years or more. I’m somewhat fond of the Warren Buffett quote on this matter: “My favourite holding period is forever.”
The real question here then: are BP shares a good buy for the long term?
A buy?
The first thing to point out is that there is still value on offer here. The forward price-to-earnings ratio of around 14 is still below the FTSE 100 average. A dividend yield of 4.08% is above the Footsie too. Both figures are likely to become more attractive in the short-term if earnings increase because of the higher cost of oil.
Looking at the Iran conflict, it’s possible to see this in two different ways. The first is that it’s become very clear how much our lives still depend on the black stuff. Energy is the lifeblood of our modern, globalised society, which suggests, whether we like it or not, that oil companies like BP are not going anywhere. The late Charlie Munger said we would need oil for another 200 years.
The counterpoint is that this might be the kick up the backside to get serious about green energy. More investment into infrastructure and perhaps more regulation on dirtier sources of energy could mean BP has a tough time of it.
On balance? No one can tell the future. But I am reminded of how tobacco has been said to be dying out for decades. And what’s the highest returning FTSE 100 stock of those on the index when it began in 1984? That’s right. British American Tobacco…
