Biggs Says BP Still `Too Speculative' to Buy as He Gets Bullish on Stocks
July 26 (Bloomberg) -- Barton Biggs, co-founder of Traxis Partners LP, discusses his investment strategy. Biggs talks with Tom Keene and Ken Prewitt on Bloomberg Radio's "Bloomberg Surveillance." (This report is an excerpt of the full interview. Source: Bloomberg)
Barton Biggs, the hedge fund manager who became more optimistic about stocks this month, said that BP Plc is still “too speculative” to buy.
After losing about 40 percent of its share price since the start of the worst oil spill in U.S. history in the Gulf of Mexico, BP has rebounded 37 percent since the end of June. BP put a cap over the leaking well to stop the flow of oil and is on track to kill it completely in the next few weeks.
“It’s too speculative for me,” Biggs said in an interview with Bloomberg Radio today. “Are these people down in the Gulf who aren’t going to be able to fish and their business was fishing, are they going to be able to sue BP for payments for the next 20 years? I don’t know, it’s too hard to call.”
The comments show that Biggs, who said he is now 75 percent net long on stocks after selling half his equity holdings at the start of July, disagrees with the 30 analysts in a Bloomberg Story who have a “buy” rating on BP stock. Just two analysts recommend selling it.
Biggs, whose Traxis Partners LLC gained 38 percent in 2009 when he bought equities as the Standard & Poor’s 500 Index fell to a 12-year low, said on July 2 that concern governments around the world curtail stimulus measures too soon led him to sell about half of his stock investments.
The S&P 500 has risen 7.8 percent since that day on optimism about corporate profits. Biggs has owned BP in the past.
New CEO
The company will announce that Robert Dudley will replace Tony Hayward as chief executive officer soon, people familiar with the matter said yesterday. The company is due to report second-quarter results tomorrow and may give a prediction of the company’s total bill from the spill.
BP’s market value has dropped by about 50 billion pounds ($77 billion) as it battled to stop the spill. The well has now been sealed, and BP plans to permanently plug it with cement next month.
The median of 11 analyst estimates of the total costs is $33 billion, a Bloomberg News survey of 11 shows, with predictions ranging from $17 billion to $60 billion. Louisiana Treasurer John Kennedy has said the total cost of the spill may reach $100 billion.
Fadel Gheit, the analyst at Oppenheimer & Co. in New York who gave the highest cost estimate in the survey of $60 billion, said BP was still worth buying.
“The upside potential is significantly greater than the downside risk,” Gheit said in a Bloomberg Television interview. “The number one priority is to cap this well once and for all. Everything else that comes after that will be manageable.”
To contact the reporters on this story: Thomas R Keene in New York at tkeene@bloomberg.net; Brian Swint in London at bswint@bloomberg.net.
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