BP (BP): Can be dangerous to catch a falling knife

By Timothy Lutts, Chiel Investment Strategist and Editor of Cabot Stock of the Month Report
From Cabot Wealth Advisory 6/14/10 Sign up for free Cabot Wealth Advisory e-newsletter

Here’s my two cents on BP (BP).

The stock has fallen from 60 to 30 in the past two months, which means some investors are thinking of buying it at a bargain price. But I learned long ago it can be very dangerous to catch a falling knife.

More intelligent is to buy when all is calm, and the stock is simply unloved.

For example, BP was recommended in the Classic Benjamin Graham Value Model in the December 2008 issue at a buy price of 44.31. Eleven months later, BP reached its Minimum Sell Price. Editor Roy Ward recommended that subscribers sell BP on November 19, 2009 at 54.30 for a gain of 34.8%.

Someday, Roy may recommend BP again, but before that happens the company will have to put its legal problems behind it (how many years will that take?), and the stock will have to fade from public consciousness.

In the meantime, Roy is looking at three oil drillers: Transocean (RIG), Ensco (ESV), and Noble (NE). For more information, click here: Cabot Benjamin Graham Value Letter.

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Tim LuttsTimothy Lutts
President, Chief Investment Strategist, Editor of Cabot Stock of the Month

Timothy Lutts heads one of America’s most respected independent investment advisory services, publishing eight newsletters to more than 165,000 subscribers around the world. Tim leads a dedicated team of professionals who serve individual investors with high-quality investment advice based on time-tested Cabot systems. Under his leadership, Cabot has been honored numerous times by both Timer Digest and the Hulbert Financial Digest as among the top investment newsletters in the industry. Tim also edits Cabot Stock of the Month.