FORT WAYNE – As if BP didn’t have enough trouble, the company’s ears must be burning.
That’s because local investors and their advisers have been talking about the London-based petroleum giant, plotting to sell the company’s stock – if they haven’t already.
“There are enough (choices) out there in the energy sector that you don’t need to subject yourself to this many unknowns, uncertainties and controversies,” said Jerry Harms, investment adviser with Grabill Wealth Management.
BP PLC’s shares have ridden a roller coaster since the April 20 oil rig explosion in the Gulf of Mexico. The ensuing multimillion-gallon spill has wreaked havoc on the region’s coastline, wildlife and small businesses.
The oil company’s growing financial losses have shaken some investors, sending stock prices plummeting. BP shares on the New York Stock Exchange ended Thursday at $32.78, up $3.58 over the previous day’s close. But the price was only about half of its 52-week high of $62.38.
“It reinforces the risk inherent in any individual stock,” said Ian Boyce, a certified financial planner with Fort Wayne-based Dickmeyer Boyce Financial Management Inc.
Only one of Boyce’s clients owned BP stock, and that person sold when the spill first happened. He suspects many British investors own the stock and depend on its dividends for income, much in the way many American investors depend on income from companies including General Electric Co.
It’s hard to say how many northeast Indiana investors might hold BP shares, relics of a time when the company was based closer to home. Standard Oil (Indiana) became Amoco Corp. in 1985. Amoco merged with BP in 1998.
Doug Lockwood, chief investment officer at Cornerstone Wealth Management, said about five of the firm’s clients owned BP stock at the time of the spill, despite the Auburn-based firm’s recommendation in January to sell stakes in oil companies.
After the catastrophe, the firm called those few investors in BP and again recommended selling – at least some of their shares. About half completely divested their holdings, and the rest sold half their BP shares and kept the other half because of the dividend, Lockwood said.
“It’s a gamble right now in a big way,” he said. “The price is just swinging wildly.”
Some market watchers are touting BP’s shares as a bargain, sure to gain in value. Lockwood termed that strategy “true speculation.”
“There are too many unknowns to place money in that bucket right now,” he said.
Some investors choose not to buy individual stocks, preferring to buy shares of mutual funds, which diversify risk by holding stock in numerous companies.
Greg Galecki, who owns Galecki Financial Management Inc., didn’t have any clients in BP stock. His clients use no-load mutual funds.
“It’s scary to hold individual stocks unless you have enough money to hold 50 to 70” different companies, he said.
Boyce recommends investors put no more than 10 percent of holdings in any one stock – less than 5 percent is even better. But it’s tough for some investors to abide by that limit, he said, when employers make 401(k) matches with company stock.
