Oil and gas producers have struggled throughout 2020. The majority of our gas-guzzling vehicles have been parked up outside our homes whilst we’ve been forced to work from home. In addition to the negative crude oil prices experienced in April 2020, the pandemic has also caused a slump in demand for oil.
I already have Royal Dutch Shell in my portfolio so similar companies don’t usually catch my eye very often. I’m a keen believer in diversification so I try to stay away from stocks in the same industry as those that I already have. Being narrow-minded and keeping my blinkers in line prevents overtrading. However, when BP recently declared a $5.7bn loss, I couldn’t help but chase after the news. It’s the first time this has happened in over 10 years and as expected, the price tumbled by 13.63%. The price today sits on 297p and it has jumped up from its lows last month. I think there are higher highs yet to come.
As a follower of Buffet’s mantra, buy the fear and sell the greed, I was very intrigued. With coronavirus vaccines rolling out at an unbelievable pace, we are beginning to see light at the end as lockdowns ease. When the UK recovers in the new world I see no reason why BP can’t fly and be amongst the biggest beneficiaries.
The oil giant has an impressive infrastructure in place and they have plans to become more efficient. Debt has been reduced by almost half and staff is being made redundant in a bid to make the organization more streamlined. $60bn of spending has been planned to reach a more renewable energy generation target of 50GW by 2030. BP has yet to fund the redundancy of 10,000 staff members.
This is 5.7% dividend yielder is, therefore, a stock, I’m relying on to pay me well into retirement and, I’m adding it to my stocks and shares ISA this month. I see this as a great acquisition and while the share price may be in for a bumpy ride, I can collect their well-protected dividend in the meantime.
Ecommerce’s steep incline
Amazon, eBay, Etsy, Alibaba. What do they all have in common? They are all leading eCommerce platforms in their respective fields. Amazon, the American-born multinational company taking on the majority of the world’s online traffic. eBay, a corporation that dominates online auction sales. Etsy focuses on eCommerce for handmade items, vintage products, and craft supplies. And Alibaba has cornered the Chinese eCommerce niche as it dominates the internet in that region of the world.
Using P/E ratio as a reasonable valuation level for the companies above, Amazon high above the industry average at 78. Etsy, which I believe is punching above its weight at 72. eBay appears undervalued with a ratio of just 18 while Alibaba comes in a conservative 38. eBay may look cheap but its activities can seem outdated. It has been using the same model of squeezing sellers and over favoring buyers for many years. Vendors have begun looking elsewhere to advertise their products. But one thing they have going for them is the fact that they are changing over to managed payments which means they can finally cut out PayPal.
Alibaba is my second pick this month. It’s got plenty of room to grow yet not struggling to maintain a high amount of market share above all its competitors. Covid has served the eCommerce business tremendously well and I believe it’s here to stay. People now realize that they can arrange for the majority of their goods to be delivered to their door without any of the downsides. China is no different. Aliexpress, a subsidiary of Alibaba, is heavily used by drop-shippers across the board. The rise of social media apps such as TikTok has given way for users on the platform to demonstrate to other avid business starters how they can dropship too.
Jack Ma made the first appearance at the end of January after going missing following his controversial speech regarding the banking system. Reports state that he even missed his appearance on a reality TV show. Worrying bouts of not seeing a public figure such as these do not board well with shareholders. The share price took a decline and while it’s looking like it may tank, it prevents a buying opportunity.
The current price sits $241.69, down over 22% since October 2020, it’s a fantastic time to buy at these low prices. There couldn’t be a better time to pick up this gem of a share ahead of an upcoming covid free world.