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Avoiding the Next BP



August 13, 2010 – Comments (3) | RELATED TICKERS: PFE , JNJ , MRK

In this blog by TMFDanDzombak he asks the question: BP (NYSE: BP) had always been thought of as a blue chip, a stock you can invest in and not worry. But then the Deepwater Horizon disaster happened, lopping off nearly 40% of the company's value. In dollar terms, that's more than $60 billion of company value, gone in less than three months. Many investors are furious and are wondering if this was foreseeable. So how can you avoid the next BP?

He then talks about the Project for Government Oversight, "POGO" which is an excellent source of information about misbehaving companys.

POGO maintains the Federal Contractor Misconduct Database, detailing instances of misconduct from 1995 to the present. Over 15 years, you would expect there to be some instances of misconduct; people are human, after all. What's interesting is to look at the companies with the most instances of misconduct.

He then finishes with the following suggestions and question:

Lesson to be learned
So what can we learn from this?

1. Beware companies that have serious records of mistreating the public trust. This flouting of ethical conventions suggests that such companies will ultimately treat shareholders poorly, too.

2. Diversify. Don't let a BP-like event wreak havoc on your portfolio. It's terrible when you hear stories of people being invested in only one or two stocks and losing all their retirement savings. Don't let this happen to you.

3. Do your homework: BP's atrocious record was available to the public.

What do you think? Is this a real way to avoid the next BP, or just a case of hindsight being 20-20? Let us know in the comments box below.

I suggested the "left" wing rags and blogs are the source he was looking for.

The POGO database is a good place to start. The incompetence of corporate America is best described by the "left" in places such as "Mother Jones", Common Dreams"  "" websites regularly denounced as "liberal" "left" or "anti business" where  the ideals of Libertarian thinking come closest to fruition as private citizens pay through voluntary contributions for the truth that neither corporate America nor their libertarian lapdogs would have you know. 

In the case of BP there has been a decade of atrticles about their abuses in Nigeria and South America and problems in Alaska and Canada.

But this is about the "next" BP, not the last one.

The "Next" BP:

I came across this from a link in a story on the common dreams website:

3 Comments – Post Your Own

#1) On August 13, 2010 at 11:41 PM, ChrisGraley (28.62) wrote:

I agree!

We should eliminate the FDA that allows the big drug companies to buy amnesty and eliminate a health care sytem that does nothing but inflate drug prices to allow these huge artificial margins that provide these drug companies the money to buy the drug police.

Next, should come tort reform and eliminating all health taxes on sick people.

It's a start and I'm sure you'll champion all of the above.



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#2) On August 14, 2010 at 12:38 AM, Momentum21 (98.13) wrote:

Very good post...thanks. I own AZN and ABT...these ideas definitely get you thinking about the future of Big Pharma, risk and exploitation.

If I had to pick a stock to short on the "next BP theory" it would be JNJ...but I am sure what I don't know about others would be much more shocking... 

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#3) On August 14, 2010 at 9:17 AM, devoish (71.86) wrote:


As you know, your suggestions have been tried in the past and the result of that lack of success was the creation of an FDA, and laws that companys could be held accountable to.


Thanks. This is not a recommendation to short any company mentioned although I would be more inclined to short PFE or MRK. The problem with this line of investing is that it took over ten years of ignoring bad BP news before the payoff came. In which case you lost a lot of money shorting it. The same could easily happen to PFE or MRK. This is more intended to avoid buying into PFE or MRK or JNJ and a way to not be there when they become todays BP (if they do) and instead try to make your money elsewhere.

I am not familiar with either AZN or ABT but I do not recall seeing their names directly mentioned in news about Doctors kickbacks, etc - maybe AZN. My suggestion would be to go to the Commondreams website and search their names, and then search again at the sites where they source the storys. Like with the housing industry the problems described in the video seem to be industry wide practices.

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