How to Buy BP Stock in 2021
Formerly known as British Petroleum, BP p.l.c is a multinational oil and gas company headquartered in London. The company is vertically integrated and operates in all areas of the oil and gas industry, including exploration and production, refining, distribution and marketing, power generation, and trading. BP also has renewable energy business interests in biofuels, wind power, smart grid, and solar technology.
The stock has risen about 20% in the first two months of 2021 and still has legs to run as it looks to benefit from the reopening of the economy after the coronavirus pandemic. This guide is for investors who want to buy BP stock.
Learn How to Buy BP Stocks in 3 Easy Steps
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Analyse the BP Stock Price Chart
Since you have already decided to buy BP shares, you don’t need fundamental analysis. Your next step should be to analyse the BP share price chart to know the right time to buy the stock. Use the technical indicators to identify the trend and the support/resistance levels, and maybe analyse the daily trading volumes.
When your technical analysis indicates a good time to enter the market, place your buy order. You may use a market order (which buys the stock at the market price) or a limit order (which buys the share price falls to your specified level). Always have a trading plan.
BP Company Overview
BP p.l.c is a multinational oil and gas company headquartered in London, and it’s a member of the “seven sisters” group of the world's seven major oil and gas companies. Formerly known as British Petroleum, the origins of BP p.l.c 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 80 countries, producing about 3.7 million barrels per day.
BP also owns a chain of convenience stores attached to their gas stations, and it also invests in renewable energy sources— it is a leading producer of photovoltaic cells. There are more than 70,000 employees in the company.
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 and services. The Rosneft segment engages in investment activities for the company.
BP operates in about 80 countries globally and was producing about 3.7 million barrels per day prior to 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.
BP is one of the world’s largest marketers of aviation fuel, supplying more than 900 ports and 1,400 airports globally. It also markets Castrol lubricants 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 about $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 traces its origins to 1909 when William Knox D’Arcy, by contract with Ali-Qoli Khan Bakhtiari, obtained permission to explore for oil for the first time in the Middle East. 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 in 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 same year, BP successfully acquired the US Standard Oil Company and the Britoil North Sea exploration company. In 1999, BP and Amoco (the American Oil Co) announced a merger — the world’s largest merger at that time.
BP began diversifying into other energy sectors as far back as 1981 when it entered into the solar technology sector by acquiring 50% of Lucas Energy Systems, a manufacturer and installer of photovoltaic solar cells. This gave rise to Lucas BP Solar Systems, and later BP Solar when it became wholly owned by British Petroleum in the mid-1980s.
In 1999, BP announced that it would buy 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 stock exchanges offer BP stock. Brokers that are registered with the London Stock Exchange also offer BP shares. To make things easier, we have shortlisted the best brokers that offer BP stock after considering their trading commissions, the user features of their trading platforms, and other factors.
Should I Invest in BP Stock?
Although the world is yearning to do away with fossil fuels, most of BP’s revenues still come from oil and gas operations, but the company is investing heavily in renewable energy. Through those investments, BP is positioning itself to remain a long-term player in the energy sector. If you believe that BP really is going green, and this appeals to you, you can add the stock to your portfolio.
BP Stock Investment Potential
Oil prices have been rising since November 2020, 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 Biden administration’s policies, oil prices are likely to rise further, which would benefit BP stock in the short term.
In the long term, BP’s investments in the renewable energy subsector could ensure the company’s sustainability in the future. So, the stock also has potential for long-term growth.
What Kinds of Investors Should Include BP Stock in their Portfolios?
Regarding the macroeconomic climate at the time of writing, and BP’s strategic investments in renewable energy, the stock should appeal to both short-term traders and long-term investors.
The reopening theme dominating the market in the first quarter of 2021, amplified by the vaccine rollout, saw energy stocks rally by as much as 50% in the three months to February 2021. However, once the euphoria fizzles out, energy stocks may not witness such a rally going forward.
The transition to cleaner energy is growing, and BP is expanding its renewable energy unit in readiness to be a long-term player in the renewable energy industry. So, the stock could also appeal to long-term investors who are interested in green themes.
How Much Should I Invest in BP?
The amount you can invest in BP shares depends on how much disposable cash you have, your risk appetite, trading style, and other important considerations. However, the general rule of thumb is to invest only what you can afford to lose, preferably not more than 2% of your total investment funds per single stock.
How to Buy Shares in BP Stock?
Shares of any company can be bought either via a stockbroker or directly from the company through what is known as a direct stock purchase plan (DSPP). Unfortunately, BP does not have any DSPP in place at the moment. So, the stock can only be bought through a broker.
Buy BP Shares through a Broker
Simply sign in to your trading account with a broker and search for BP using the appropriate ticker: BP. Then, click on the stock and place your buy order. It could be a market order or a limit order. The order is sent to the exchange floor where it is executed, then you can monitor your open position via the broker’s online dashboard.
Frequently Asked Questions
Although BP recorded a huge loss in the 2020 financial year, the stock may still be a good buy in 2021. It could benefit from bargain and value hunting that’s dominating the first half of 2021. Moreover, BP is expanding its renewable energy unit, in readiness to be a long-term player in the renewable energy industry.
BP has been a profitable business over the years. However, it suffered a $20 bln loss in the 2020 FY due to the impact of the coronavirus pandemic.
Yes, BP has been paying its stockholders consistent quarterly dividends in recent years. Despite the impact of the coronavirus pandemic, the company paid dividends for all four quarters of the 2020 FY.
Yes, you may need to do that. When your fundamental analysis tells you that the company is healthy for investment, you have to do a technical analysis to know the right time to buy. You can use technical analysis to buy on a dip or when there’s a breakout.
The rule is to invest with an amount you can afford to lose and not commit more than 2% of your investment capital to any single trade. If you want to trade with leverage, always place a stop-loss order so you don’t lose more than you intended to risk.
BP stock is listed on the London Stock Exchange and the New York Stock Exchange. Your broker can buy the stock from either of those exchanges.