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Avoiding the Next BP



September 19, 2010 – Comments (0) | RELATED TICKERS: CHK , HAL , DVN

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.

Does this mean you should short any company? No. It took ten years before BP's problems turned into a gusher. It does mean that these companys do not get my hard earned cash. There are other fish in the sea.

Here is a story of very poor quality control, destroying the health and well being of their neighbors - or as Dan says - "mistreating the public trust". It is a story of Congressional corruption, as our Congressmen pass laws to exempt the fracking process from EPA regulation.

Some are happy they can learn all they need to know on a subject from a thirty second sound byte on FOX. Not this Fool. A one hour documentary provides far moore. Here is the much shorter trailer.


Due diligence

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