Anything Can Be Profitable if You Buy at the Right Price

A year ago, all there was to see on TV was the oil spill in the Gulf of Mexico. It claimed 11 lives and was gushing with no end in site. It lasted weeks and weeks and weeks. Everyone wanted to hold BP accountable and spoke so much ill of them, and it was understandable. But here stood a great opportunity. Here was a company that had lots and lots of cash and was making lots and lots of money, but it was saddled with the problem of public disdain.

Everyone thinks investors are so smart and savvy, but all they did was dump the stock. No one knew how much it would cost BP, although estimates kept coming out. First, it was a few hundred million, then $1 billion, and then $2 billion dollars! And the stock kept crashing, and all I kept thinking was "who cares!?!? $2 Billion is nothing!" Iin the end, they had to escrow $20 Billion for damages and I still say "who cares!!!" This was a company that was making tens of billions and had $30 Billion in cash or receivables at the end of 2009.

This was prime for the picking. But of course, I bought some at around $37 per share with the dividend yield at 10% or so. Of course, it kept falling and I added along the way, but it went down to $24 and I didn't add there. Has anyone seen where it is today? $46 per share. I am up a a blended 26.1% on my BP investment.

Unfortunately, the dividend was halted to store up the $20 Billion that was needed in escrow. Today, BP announced "bad" 2nd quarter earnings of $5.6 Billion. That's the quarter everyone. Not the year…the quarter. I will be keeping my BP stock for a while, I would say.

So I got lucky a second time this year. I went against public opinion and looked into Greek debt. If you saw my previous blog post about it, even my brokers at Merrill Lynch said none of their clients had requested it.  Well, I bought just a month ago and recently liquidated my position. I ended up with a 5.23% gain in the month. Now, it's not a ton, but it was done to prove a point… DO NOT BELIEVE OR BUY INTO EVERYTHING YOU READ!

Sometimes you need to be doing what everyone else is ignoring, especially in investments. Now, keep in mind, I am not keeping this for a long time, but I did it for the short term. I thought everyone was overexaggerating what was going on in Greece, if you read what I wrote. I felt that a bailout would happen for them. I still do believe and would almost guarantee that they will default and be in even more trouble in the future, but the point of this investment was to show that sometimes things are beaten down to a bloddy pulp far beyond recognition…and it's just not required. This is what makes investing so great. You can make anything profitable if you buy it at a good enough price. 

Don't just buy what's sexy or fun. Buy what makes sense. Now, I don't recommend everyone buying Greek debt. In fact, after the Euro conversion, it only ended up being 0.4% of my portfolio, but I would have recommended BP to anyone who has a portfolio. It's a good company who had an unfortunate incident.  Greece is a nice country with a lot of problems, hence why I exited.