The time to buy is when there's blood in the streets, the old axiom goes. But for shares of BP (BP), the time to buy might be as oil continues to gush into the Gulf of Mexico.
Liabilities for the company continue to mount, along with gargantuan damage to the Gulf Coast. On Sunday, reports that President Obama will push to have the company put aside set aside large amounts of cash, to compensate businesses and persons affected by the oil spill, added to the tensions already brewing about whether the company should suspend paying dividends to shareholders.
BP stock has come under selling pressure throughout most of May and June. But some of those who've taken a hard look at the company's balance sheet -- like John Authers, editor of the Lex column at the Financial Times and author of The Fearful Rise of Markets -- say investors might be getting carried away with the BP sell-off.
The miserable sentiment surrounding the shares may be masking the enormous financial resources the company has to pay for damages, Authers tells DailyFinance in a video interview (see below).
Wider, More Lasting Damages
However, Authers also points out that the fallout for businesses and markets more broadly amid rising public outrage and lawsuits, may have a much more lasting impact. The BP disaster comes on the heels of high-profile fraud charges against investment bank Goldman Sachs (GS) for misleading investors. While Goldman has vowed to fight the charges, its reputation and stock price have taken a severe beating nonetheless.
Amid growing public anger, political pressure and limiting regulations, returns for shareholders may be depressed overall compared to more freewheeling times, Authers says. Indeed, the contaminated business environment could linger long after BP's spilled oil has been cleaned up.
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