The big news last week was that major UK oil company BP (BP.) is reducing investment in renewable projects and investing more in oil and gas. This is a reversal of previous strategy which I and many major investors such as Elliott welcome although it has angered some of the chattering classes.
As I have said before, I am a holder of BP shares but I have been selling the shares after profit forecasts declined and the share price fell. BP simply said it had been too optimistic in its decision to move to green energy when its rivals took a more conservative strategy.
Well it’s never too late to change your mind if a strategic decision proves to be a mistake. So congratulations to BP for making this decision. One of my stockbrokers now rates BP as a “buy” with a p/e ratio of 9.7x and a prospective dividend yield of 6.0% but I won’t be rushing in to buy back the BP shares I sold. I might even have to sell more to realise some capital gains tax losses before the end of the tax year that is looming. Turning around this giant is going to take some time. There may be better opportunities in US oil companies subject to less political interference. Now if BP was to move domicile and share listing to the USA, the story might be different……
There have been sharp falls in Nvidia and Tesla shares of late. Neither of which I held for reasons given below. There was a good article on Nvidia in Investors Chronicle the week before last. This AI semiconductor specialist is facing new competition from DeepSeek and other challengers while Tesla is seeing falling sales with Chinese competitors such as BYD moving into the electric car space with good products while the older car manufacturers are also catching up.
The big problem with shares in such technology companies is always that the competition can leapfrog with newer products and more advanced technology. It’s very difficult to predict what will happen and when. The only protection is to build an ecosystem of services around the products (as Apple have done to some extent) or have products that customers have come to rely on and are locked in with proprietary technology (as Microsoft has done). But the car market is still wide open to new and cheaper competition.
On the war in Ukraine, it was fascinating watching the Trump/Zelensky press conference where they seemed to want to negotiate a deal in public. Trump was quite rightly in my view refusing to guarantee a Ukrainian peace settlement which he rightly said was a path to World War III. This was a big missed opportunity though to achieve some progress in halting the war.
Media comments in Europe unfortunately mainly supported Zelensky when the USA see him as the main problem, and so do I.
Roger Lawson (Twitter: https://x.com/RogerWLawson )
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