My first trade - Shell / BP

[KDave]

4 hours ago, Stacktastic said:

Im starting to loose a bit of faith in many of these people especially when you watch them over a period of time and they then change course and forget thier previous predictions or statements. If it was not for monetisation, affiliates & some form of ego satisfaction, you wonder if they would be there in the first place?

I do think it will crash though, might not be as abrupt, but I do feel that cvid is just the start of somehting a lot larger. Maybe civil war in the USA?? Dont know, but I just wish I had 100k to drop into the markets, crypto & mining stocks when or if it tanks..

I was looking today at the odds of Kanye winning the election. its 1000 to 1! Even £10 will reap £10k. Imagine dropping 10k into it and he wins (no chance though). 😛

There is a joke that an investor is just a successful speculator. The joke can only be true if you confuse gambling with investing, in which case, jokes on you. Say you put £10,000 into opening a business in a product you are sure will do well, that business goes on to make £20,000 - was it a successful gamble? Or was it an investment? Which best describes it. The same process is happening when you buy into a company on the stock market for the same reasons, the share price is the price of entry. Do you want to pay more to set up the business/position due to a high share price? Or would you rather pay less to set up? Keep the ideas about gambling and investing separate, as they are not the same thing. If you are trading solely on a share price movement then you can say you are speculating/gambling, because as we have seen over 2020 the short term movement of share prices often have little to do with either the long or short term realities and prospects of the business or the economy.

You are right to lose faith in commentators, just use them for information and then you don't need to work out what angle they are working because its then irrelevant to you. Personally I share what I am doing here and elsewhere to hold myself to account and test my ideas out. I think perhaps some of the commentators I follow do that as well, but who cares, I am only listening not really following despite the social media terminology. Perhaps there isn't much difference.    

Parts of the market, especially the US market are overvalued by many metrics, other markets such as the FTSE are not. Look at the difference between what is in the NASDAQ and what is in the FTSE 100 as an example of where the money is going. FTSE 100 is heavy into materials, mining, oil, etc. US markets have trimmed oil and gas in some cases (was it the DOW that cut oil and gas? I forget). We may get a crash like March, we might instead get a rotation into value and materials, we may get the big one like 2007 or 2000. Who knows. There are a lot of people in on the reflation trade right now from what I am reading, it is quite possible we will see a good shake out of the weak hands before things turn around next year. In the case of the oil price, the lower it goes now, the higher it goes later. 

[HerefordBullyun]

I was kinda right today about my gut feeling at the weekend 35bn got wiped off SAP stocks today in the German stock exchange. Maybe just the start of the tech bubble bursting... https://uk.finance.yahoo.com/news/germany-sap-shares-plunge-wiping-35-bn-off-its-value-110457545.html

 

[HerefordBullyun]

10 minutes ago, KDave said:

There is a joke that an investor is just a successful speculator. The joke can only be true if you confuse gambling with investing, in which case, jokes on you. Say you put £10,000 into opening a business in a product you are sure will do well, that business goes on to make £20,000 - was it a successful gamble? Or was it an investment? Which best describes it. The same process is happening when you buy into a company on the stock market for the same reasons, the share price is the price of entry. Do you want to pay more to set up the business/position due to a high share price? Or would you rather pay less to set up? Keep the ideas about gambling and investing separate, as they are not the same thing. If you are trading solely on a share price movement then you can say you are speculating/gambling, because as we have seen over 2020 the short term movement of share prices often have little to do with either the long or short term realities and prospects of the business or the economy.

You are right to lose faith in commentators, just use them for information and then you don't need to work out what angle they are working because its then irrelevant to you. Personally I share what I am doing here and elsewhere to hold myself to account and test my ideas out. I think perhaps some of the commentators I follow do that as well, but who cares, I am only listening not really following despite the social media terminology. Perhaps there isn't much difference.    

Parts of the market, especially the US market are overvalued by many metrics, other markets such as the FTSE are not. Look at the difference between what is in the NASDAQ and what is in the FTSE 100 as an example of where the money is going. FTSE 100 is heavy into materials, mining, oil, etc. US markets have trimmed oil and gas in some cases (was it the DOW that cut oil and gas? I forget). We may get a crash like March, we might instead get a rotation into value and materials, we may get the big one like 2007 or 2000. Who knows. There are a lot of people in on the reflation trade right now from what I am reading, it is quite possible we will see a good shake out of the weak hands before things turn around next year. In the case of the oil price, the lower it goes now, the higher it goes later. 

Sage advice right there @KDavegood post👍

[Kman]

42 minutes ago, KDave said:

There is a joke that an investor is just a successful speculator.

I read somewhere that a gambler puts 1 in to win 10 in an afternoon, an investor puts 10 in to make 1 in a year

I thought that was quite nice and succinct

 

[Stacktastic]

 

8 hours ago, Kman said:

I read somewhere that a gambler puts 1 in to win 10 in an afternoon, an investor puts 10 in to make 1 in a year

Yes I was only joking, good post. 

I have not gambled in my life I dont think, even at the races I put mental bets down, thats enough for me.
Makes me laugh when gamblers get so happy when they win. I used to watch guys on the slot machines in pubs. They would constantly put the money in & after £200 win £50 and somehow think they did well?

I have however made some bad investments ( especially with regards to BP & Shell) as I got in too early or too late, but they will reverse at some point & at the very least I will get my investment back (assuming no market collapses or nuclear wars). Taught me to be more patient & do more research, so as per the uranium & crypto, I'm biding my time.

8 hours ago, HerefordBullyun said:

I was kinda right today about my gut feeling at the weekend 35bn got wiped off SAP stocks today in the German stock exchange. Maybe just the start of the tech bubble bursting... https://uk.finance.yahoo.com/news/germany-sap-shares-plunge-wiping-35-bn-off-its-value-110457545.html

It has been said it will be around the election, so maybe. The FTSE is not looking great either. 
Some funny spikes on the silver prices, whats all that about? Big purchases / comes etc??

Oil has tanked yesterday (excuse the pun), but its held quite well if you ask me. Im still £5 up on WTI & going to add too it if it goes negative, but I will wait for a bottom of sorts.

Edited October 27, 2020 by Stacktastic

[KDave]

@Stacktastic Get your money back on BP and Shell as they are a bad investment? Please explain how that one works?  

[KDave]

https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/investors/bp-third-quarter-2020-results.pdf

BP quarterly results, a minuscule profit, some debt paid off, dividend being paid for now. They have stopped bleeding at realised average WTI $40.91 and Brent $42.94, if we see much lower than those markers then and they will struggle all being equal. Although not good for BP short term we could do with sub $40 oil prices for a few months ideally to make a big difference long term, the lower it goes now the higher it goes later. 

"In the quarter, net debt reduced to around $40 billion and our cash balance point was around $42 Brent, despite weak refining margins, low gas prices, reduced product demand and the payment to Reliance. Funding the dividend remains our first priority and we are confident in moving towards our $35 billion net debt target, supported by value accretive divestments." 

[Kman]

3 hours ago, KDave said:

BP quarterly results, a minuscule profit, some debt paid off, dividend being paid for now. They have stopped bleeding at realised average WTI $40.91 and Brent $42.94, if we see much lower than those markers then and they will struggle all being equal

Not bad all things considered

I think this might be the eye of the storm though with covid cases creeping back up - Italy and Spain leading the way with restrictions like they did in March

I read Libya are doubling production which will effect barrel prices, seems very poor timing

[HerefordBullyun]

16 minutes ago, Kman said:

Not bad all things considered

I think this might be the eye of the storm though with covid cases creeping back up - Italy and Spain leading the way with restrictions like they did in March

I read Libya are doubling production which will effect barrel prices, seems very poor timing

They are going to struggle with all OPEC countries.

[HighlandTiger]

I had Nextera energy on my watch list, as it seemed to be mentioned everywhere I looked, and today it's dropped by over 70%. Can't find out why the massive hit, but glad I never bought any😁

[Kman]

56 minutes ago, HighlandTiger said:

I had Nextera energy on my watch list, as it seemed to be mentioned everywhere I looked, and today it's dropped by over 70%. Can't find out why the massive hit, but glad I never bought any😁

Symbol NEE? nothing drastic has happened that I can see, they're up 0.38%

[HighlandTiger]

Must be a freetrade glitch then. 

 

[KDave]

6 hours ago, Kman said:

Not bad all things considered

I think this might be the eye of the storm though with covid cases creeping back up - Italy and Spain leading the way with restrictions like they did in March

I read Libya are doubling production which will effect barrel prices, seems very poor timing

$100 million profit is like small change to these companies but its good to see them already reaching $40 break even.

[Kman]

40 minutes ago, HighlandTiger said:

Must be a freetrade glitch then. 

Ahh I see, yes as far as I can tell nowhere else is showing the same

3 minutes ago, KDave said:

$100 million profit is like small change to these companies but its good to see them already reaching $40 break even.

Yes that's true, they've all been cutting the fat so another result as bad as Q2 shouldn't be possible even with a fall in demand over Q4 with lockdowns and travel restrictions

This was quite interesting from BP

“Funding the dividend remains our first priority and we are confident in moving toward our $35 billion net-debt target,” Auchincloss said in a statement released earlier.

Once net debt reaches that threshold, BP will be able to begin share buybacks, which Auchincloss said could happen between the fourth quarter of 2021 and the first quarter of 2022. However, the CFO added that buybacks redirecting capital expenditure into its low-carbon business remains higher up in the priority list."

Another thing I need to look into is they have less debt now but they did "hybrid bonds" https://in.reuters.com/article/us-bp-fundraising-bonds-idUSKBN23P1OU to raise 12 billion

I'm not going to lie I'm not sure what hybrid bonds are, something I need to look into, but has that papered over any cracks? or was it a very healthy way to do it, it seems like it was healthy but again I don't know as of yet what a hybrid bond is 

 

[KDave]

1 hour ago, Kman said:

Ahh I see, yes as far as I can tell nowhere else is showing the same

Yes that's true, they've all been cutting the fat so another result as bad as Q2 shouldn't be possible even with a fall in demand over Q4 with lockdowns and travel restrictions

This was quite interesting from BP

“Funding the dividend remains our first priority and we are confident in moving toward our $35 billion net-debt target,” Auchincloss said in a statement released earlier.

Once net debt reaches that threshold, BP will be able to begin share buybacks, which Auchincloss said could happen between the fourth quarter of 2021 and the first quarter of 2022. However, the CFO added that buybacks redirecting capital expenditure into its low-carbon business remains higher up in the priority list."

Another thing I need to look into is they have less debt now but they did "hybrid bonds" https://in.reuters.com/article/us-bp-fundraising-bonds-idUSKBN23P1OU to raise 12 billion

I'm not going to lie I'm not sure what hybrid bonds are, something I need to look into, but has that papered over any cracks? or was it a very healthy way to do it, it seems like it was healthy but again I don't know as of yet what a hybrid bond is 

 

https://www.investopedia.com/terms/h/hybridsecurity.asp

Good question, it looks like normally a hybrid is debt that can be converted into equity. For existing share holders its an ongoing threat of a placing, which is otherwise just more debt. For the bond buyer its a secure way of investing in a company (lenders are paid first in bankruptcy) that pays a guaranteed a decent yield, with option to convert to shares? I can't find the details anywhere for BP, it looks like 3.5% yield for the bond holder. Its only brief mention in Q2, I didn't pay it much attention at the time; 

https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/investors/bp-second-quarter-2020-results.pdf

"Updates to significant accounting policies, Hybrid bond issuance: On 17 June 2020, a group subsidiary issued perpetual subordinated hybrid bonds in EUR, GBP and USD for a USD equivalent amount of $11.9 billion. As the group has the unconditional right to avoid transferring cash or another financial asset in relation to these hybrid bonds, they are classified as equity instruments and reported within non-controlling interests in the condensed consolidated financial statements. The contractual terms of these instruments allow the group to defer coupon payments and the repayment of principal indefinitely, however their terms and conditions stipulate that any deferred payments must be made in the event of an announcement of an ordinary share or parity equity dividend distribution or certain share repurchases or redemptions." 

Looks like these are more bond than share, in that BP does not have to transfer cash (I read as repayment of principle) or financial assets (I read that as placing of shares) to the bond holders. These bonds are open ended in that BP can defer the principle repayment indefinitely, and can defer interest payments. BP can only defer interest payments until a dividend or share repurchase is announced. If I am reading into that right, this gives BP the option of breathing room on coupon payments linked to the dividend. A lever to pull, if its cancels the dividend then it can stop the coupon payment until they are both restored. In return the bond holders get 3.5% yield which will be paid as often and for as long as a dividend is paid. But they will not see a share nor will their principle be repaid. Seems quite a risky product for the buyer, perhaps there is more to it or I am reading into that incorrectly.

Perhaps BP are refinancing at lowish interest rates for the long haul while they can. That yield is pretty low given the flexibility offered to the company. I have not found much to go on, I would like to see the details from the bond holder perspective to see if its a good deal for them beyond the yield, because if inflation picks up even at that yield this is still a better deal for BP than the bond holder. If I have this right its a great move; 11.9 billion in perpetual long debt at only 3.5% which can be turned off with the dividend (in a disaster scenario)?

[Stacktastic]

23 hours ago, KDave said:

@Stacktastic Get your money back on BP and Shell as they are a bad investment? Please explain how that one works?  

Dont remember saying it was a bad investment? I just got in too early (-£400 on BP alone right now), but its no issues as it should go back up. Dividend worth it. Not sure what i have said or what you mean, sorry.

Markets tanking today, Crude has dipped right down. I had a put on Energy Transfer that bought last night, I did not think it would get to that level! Good company though, so happy with that as it was only £80. Shall add to it on any dips.

 

Edited October 28, 2020 by Stacktastic

[KDave]

On 27/10/2020 at 07:57, Stacktastic said:

I have however made some bad investments ( especially with regards to BP & Shell) as I got in too early or too late

I think I was going off this but see you mean timing wise, you are not wrong but its a rare case when someone maximises on timing. 

Yes FTSE is getting battered today, BP at £1.89 and Shell £8.55 last I looked. Lots of red in my portfolio too, this Friday I will add some more red  BP dividend is roughly 8.4% now

[Kman]

On 02/10/2020 at 14:27, Kman said:

 

I'd have very similar questions about Rolls Royce, why is now the bottom? I've not seen anyone give an explanation as to why now is the time to buy

-65% today, very volatile after a steep move back up

 

[Stacktastic]

8 minutes ago, KDave said:

I think I was going off this but see you mean timing wise, you are not wrong but its a rare case when someone maximises on timing. 

Yes FTSE is getting battered today, BP at £1.89 and Shell £8.55 last I looked. Lots of red in my portfolio too, this Friday I will add some more red  BP dividend is roughly 8.4% now

Ah got you. Yes I meant bad timing as I made a bad assumption it was about to go up. I cost averaged too often & don't really have enough funds too continue. Not somehting I have replicated since.  so i have leant my lesson. 

[KDave]

1 hour ago, Kman said:

-65% today, very volatile after a steep move back up

 

-65% headline is a bit misleading, as holders are getting 3 shares for 1. At 80p a share they still holding £2.40 worth of value, so is the share price down? Looks like they are up 20p equivalent on yesterdays value. 

[KDave]

1 hour ago, Stacktastic said:

Ah got you. Yes I meant bad timing as I made a bad assumption it was about to go up. I cost averaged too often & don't really have enough funds too continue. Not somehting I have replicated since.  so i have leant my lesson. 

The lesson being not to time the market expecting a quick win. At least you did it with majors that are going nowhere and will pay you to wait, there are harder ways to learn, for example on AIM 

These oil companies are hated now, and oil price may stay subdued for months yet - good. It needs to stay low at least until this Friday. Give it until after the US election when stimulus turns back on, allow time for those infrastructure projects to start coming online, wait for China, India and the rest of the world to continue its industrialisation.

Green energy is a dream that needs massive amounts of oil, coal and gas to make a reality. Keep cost averaging into the reality behind the dream 

[HerefordBullyun]

I'm waiting for BP to go below 1.80 although it's great entry point now I think. But it's going to be a bumpy ride

[HighlandTiger]

I'd bought in BP at £2.02, saw it was being hammered in recent days, so jumped back out at £1.99. Keeping the money sitting there waiting for a bottom of sorts to jump bank in. 

[HighlandTiger]

I'm wondering if a small part of the anti oil sentiment is because of Joe Bidens comments against the oil industry. If Biden wins, the oil industry gets a hammering, when Trump wins, the money flows back into oil. 

[Roy]

14 minutes ago, HighlandTiger said:

I'd bought in BP at £2.02, saw it was being hammered in recent days, so jumped back out at £1.99. Keeping the money sitting there waiting for a bottom of sorts to jump bank in. 

At the beginning of the year, BP was 4.97.

£2.02 is a gift!

As a gold investor HT, you should know better! 😋