My biggest successes as an investor have involved me buying shares in companies that are not in the best position when I buy them. However, by the time I sell them they are in a far better position; hence the substantial rise in their share price.
So, for me, companies that offer potential are more attractive than companies that are the finished article, because I think there is more upside for private investors like me.
One important facet of a company that is able to turn itself around is tenacity. In other words, management must have a strong desire to improve the status quo and make the necessary changes to significantly improve the business and its prospects.
So, I was very encouraged to read recently that BP (LSE: BP) (NYSE: BP.US) is certainly doing all it can to make a comeback from the Gulf of Mexico oil spill in 2010. Indeed, it’s probably the most tenacious comeback I have ever seen!
BP is suing the US government over a decision to exclude the company from taking part in tenders for federal contracts after it pleaded guilty to criminal charges over the oil spill. In November 2012, the US Environmental Protection Agency (EPA) temporarily suspended BP from new government contracts, highlighting its apparent “lack of business integrity” as the reason.
Furthermore, the EPA stated that the suspension would prevent BP from winning federal contracts until it could provide sufficient evidence that it met federal business standards.
Clearly, BP is becoming frustrated with the situation it finds itself in. Certainly, it accepts settlement of the criminal charges (which it did shortly before the EPA’s decision) but it is seemingly fed up of being continually punished for the oil spill. Indeed, it is not difficult to see why, since for more than two and a half years after the disaster it had been selling fuel to the US government, with BP continually being deemed a “responsible contractor” prior to each sale.
So, by challenging the EPA’s decision BP is making it clear that it wants to change the status quo and has the guts to do something about it.
Indeed, the status quo presents, in my view, a golden opportunity to buy shares in BP. Not only does the company trade on a price-to-earnings (P/E) ratio of just 7.5, it currently offers a yield of 4.8%. When the FTSE 100 is currently offering a yield of 3.6% and a P/E of 15, I think that BP could be a great long-term addition to your portfolio.
Of course, you may be looking outside of the oil & gas sector for an addition to your portfolio. If you are, The Motley Fool has come up with a shortlist of its best ideas called 5 Shares You Can Retire On.
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> Peter owns shares in BP.