RealMoney Staff
Don't Be Scared by Bumps in the Road, by Roger Nusbaum
BP has had its share of problems in the last few weeks. If you go back to the refinery accident in Texas and to questions over propane market manipulation, it has been a bumpy couple of years. This summer, BP made the news because it was forced to shut down a pipeline in Alaska that was badly corroded, crimping oil supplies at a sensitive time. On Tuesday there was a new bombshell: Federal investigators are looking into whether BP manipulated crude oil prices in 2003 and 2004 and gas prices in 2002. The story has a lot of moving parts, and we probably won't know the full scope for quite a while. If you are more of a short-term investor, you probably sold at the first whiff of trouble after the pipeline news. Part of owning an individual stock is knowing what it is capable of doing, price-wise, in reaction to good and bad news. A quick look at the multiyear chart above shows that the stock regularly has dropped 10% to 15% in reaction to bad news. While the current batch of bad news creates psychological discomfort, the market doesn't seem to be treating this any differently. I believe there could be a loose psychological parallel to Altria(MO Quote - Cramer on MO - Stock Picks). Despite years of even bigger and more dangerous risks, the stock has continued to float higher. I think the pipeline news creates awareness of just how vital Alaska is to our energy needs, and BP is the biggest fish in that important pond. For a short-term trader, there could be more bumps in the road to be sure, but a big company facing a few months of uncertainty is nothing new. At the time of publication, Nusbaum held BP in client accounts, though positions may change at any time.
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