Energy stocks have been leading the reopening theme in the stock market. The 2020's erstwhile worst performer has been leading the bullish run as investors rotate out of growth stocks into value. One of such stocks, which has sprung in its heels, is BP. The stock has risen about 20% YTD and still has legs to run. So, this article will be a guide for investors who are interested in buying BP stock.
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Learn How to Buy BP Stocks in 3 Easy Steps
Find a broker
Buying BP stock (or any stock for that matter) begins with opening a brokerage account. A broker is an intermediary between your money and the stocks you wish to own. Your choice of broker should be influenced by your investing needs
Analyze the BP stock price chart
While fundamental analysis tells you which stock to choose, technical analysis tells you when to enter and exit a stock position. Before you buy shares in BP, take a look at the price chart and use some technical indicators, such as RSI, MACD, and Fibonacci to determine the best time to enter and exit your trades.
After doing your analysis, you may start trading. The need for a trading strategy can never be overemphasized as it encompasses not only how to position your trade but also how to manage your risks and avoid getting swayed by the noise of the market
BP company overview
BP Plc is a multinational oil and gas company headquartered in London, and it’s a member of the seven sisters (a group of the world's major seven oil and gas companies). Formerly known as British Petroleum, the origins of BP Plc can be traced back to its roots in the Anglo-Persian Oil Company, which was established in 1909. As of 2018, BP was the sixth-largest oil and gas company globally operational in over 80m countries and produces about 3.7 million barrels per day.
BP also owns a chain of convenience stores attached to their gas stations. The company also invests in renewable energy sources — it is a leading producer of photovoltaic cells. The company currently has over 70,000 employees.
BP business model and revenue streams
BP is a vertically integrated oil company that generates revenue through three segments Upstream, Downstream, and Rosneft partnership. The Upstream segment is focused on the exploration of oil and natural gas, including production. The midstream segment deals with the transportation, storage, processing, and marketing of crude products. The Rosneft segment, on the other hand, engages in investment activities for the company. BP operates in about 80 countries globally and produces about 3.7 million barrels per day (before the pandemic).
The downstream segment is the most profitable division of the company with more than 70% of its profits being generated in Europe and the United States. In 2019, BP reported that the upstream segment generated $54.5 billion in revenue, while their downstream segment brought in $250.9 billion.
The company is one of the world’s largest marketers of aviation fuel, supplying more than 900 ports and 1,400 airports globally. It also markets lubricants — Castrol — through its chain of convenience stores. Since 2010, BP’s revenue in the other businesses and corporate (Rosneft) segment has been slowly decreasing. As of 2019, they brought in just fewer than $1.8 billion.
In 2020, BP reported $179 billion in total revenues with a loss of $20bn. Due to the effect of the pandemic, the company has doubled its focus on renewable energy sources. Through its subsidiary, BP Green, the company is developing infrastructure for renewable energy and is positioning itself to profit from the inevitable global energy transition.
History of BP
The company which later became known as BP traces its origins to 1909 when it was established by William Knox D’Arcy. D’arcy, an Englishman who ventured to Iran in search of oil, registered the company under the name Anglo-Persian Oil. The company was acquired by the British government shortly before the outbreak of the first world war. This was done to secure supplies of oil to the British troops during the war. During wartime, Anglo-Persian Oil expanded into Canada, South America, Africa, Papua, and Europe following the surge in the oil demand. In 1935, the company was renamed the Anglo-Iranian Oil Company.
Following a political dispute, in 1951, Iran nationalized the company’s assets, which at that time was the UK’s largest investment overseas. To hedge against this, the company began exploration in other Middle Eastern countries, such as Kuwait and Iraq, as well as North African countries like Libya.
The British government sold its last shares in the company in 1987, a time when the company's fortunes were in dire straits due to a number of poor investments. That was the same year BP successfully acquired the US Standard Oil Company and also acquired the Britoil North Sea exploration company. In 1999, BP and Amoco (the American Oil Co) announced a merger which was the world’s largest-ever. Following a merger, the company took on the Amoco name which they retained until April 2000.
BP began diversifying into other energy sectors as far back as 1999 when it announced that it would buy from Enron’s 50% stake in the solar electric company Solarex. The deal gave rise to BP Solarex, which is arguably the world’s largest solar electric company.
Brokers that offer BP shares
All brokers with access to the US stocks exchanges offer BP stock. Brokers that are registered with the London Stock Exchange also offer BP shares. To make things easier, we have shortlisted a number of best brokers offering BP stock.
Should I invest in BP stock?
Yes, BP stocks are a good investment. A lot of finance is being directed towards renewable energy, and the present U.S. administration has expressed support for alternative energy sources. Interestingly, BP is aggressively investing in renewable energy, so the stock will continue to perform over the long term.
BP stock investment potential
Oil prices have been rising since November, driven by the vaccine rollout program and the continued controlled supply from producers. As oil exploration and shale oil production in the US tightens due to the policy of the Biden administration, this would further push oil prices up.
BP stock has the potential for strong returns in the long run, but with the company being at such an early stage in its new strategic plan (renewable energy investment) there is likely to be considerable uncertainty around the stock in the near term. Also, there is no guarantee that oil-producing members will continue to adhere to agreed production quotas. If the agreement breaks down, oil prices will plummet, which would affect the stock’s performance.
What kinds of investors should include BP stock in their portfolios?
Regarding the current macroeconomic climate, BP stock would appeal to both short-term traders and long-term investors. The reopening theme currently dominating the market amplified by the discovery of the vaccine has seen the prices of oil companies rally by as much as 50% in the last three months.
Once the euphoria fizzles out, oil companies may not post the same exponential rise in share prices. In the long term, the transition to cleaner energy is growing, which means more bumps on the road for oil prices in the long term. However, BP is expanding its renewable energy unit, in readiness to be a long-term player in the renewable energy industry.
How much should I invest in BP?
The amount one can invest in BP depends on financial standing, portfolio size, risk appetite, and knowledge of stock investing. However, the general rule of thumb is to invest only what you can afford to lose, preferably not more than 2%.
How to buy shares in BP stock?
Step 1: Choose a broker
BP shares can only be bought through brokerages as the company has not made provision for direct stock purchase. Though there are many brokers, having an idea of your investment philosophy and trading strategy would help you find a broker that appeals most to you. Consider factors, like trading fees, the security of your funds, and user experience, before making a choice.
Step 2: Fund your account
After you have opened a brokerage account, you have to fund it with the amount you intend to trade with, which often depends on your available disposable funds and investment outlook.
Step 3: Purchase BP shares
You can trade BP shares at market price or place a limit order. While the former helps you buy the share at the current market price, the latter executes the deal when the share price hits your specified price target. Always have a clear trading strategy and do not commit more than 2% of your portfolio to trade any stock.
Buy BP shares using a broker
To purchase BP shares, you will need to do so through a broker. If you do not have a brokerage account, you can easily open one immediately, provided you have all the details and documents required.
Other requirements for operating a brokerage account vary among brokers as some require a minimum deposit, while others require potential customers to maintain a minimum amount in their brokerage account. Be sure to check with the minimum requirements, including terms and conditions before opening a brokerage account.
Buy BP shares with a direct stock purchase plan (DSPP)
Unfortunately, shares of BP cannot be bought through a direct stock purchase plan as the company does not have any such plan in place at the moment.
Frequently Asked Questions
Yes, BP is a good buy in 2021.
It is, but the pandemic dealt with BP in 2020.
Yes, you can make money trading BP.
Each trading platform appeals to a subset of investors/traders. As such, the "best" platform depends on your preferences.
BP stocks can be traded when the stock market is open — between 9.30 a.m. and 4:00 p.m. New York time. They can also be traded pre-market and after-market hours.
BP is listed on the New York Stock Exchange, as well as on the London Stock Exchange.