There has been lots of press coverage how the cut in the dividend would be a blow to millions of savers with approximately £1 in every £7 received by UK pension funds coming from BP (LON:BP., NYSE:BP). It’s also worth remembering that there are probably a large number of US pension fund holders as well. However, very little seems to have been made of the crucial role being played by the pension fund managers and large institutions who are the major shareholders in the oil giant. The more than 40% fall in share price hasn’t arisen through private investor selling, it’s been the big institutions and hedge funds who have been leaving the sinking ship. It’s surely time for the big pension fund managers to offer support in the best way possible by acquiring shares.All the leading institutional analysts take great pleasure in telling us how cheap BP’s shares now appear, however, their investment management brethren sitting across the trading floor appear reluctant to act.
JPMorganCazenove (NYSE:JPM) has this morning reiterated its view that BP’s entire US upstream and downstream business has a likely market worth in excess of US$100 billion. Goldman Sachs (NYSE:GS) has also reiterated its own Enterprise Value/Discounted Annualised Cash Flow based (that’s a mouthful!) target price of 600p (US$52 for the ADR) which includes an assumed US$23bn post-tax liability to BP (LON:BP., NYSE:BP). Goldman cites key risks as a failure in the relief well, a deeper cut to the dividend than currently forecast and materially lower oil prices. We disagree; the key risk in the short term appears to be inappropriate rhetoric from the Obama administration. Even House Speaker Nancy Pelosi is now getting in on the act criticising BP for their “lack of integrity”; remember Bhopal Nancy!To conclude, it’s surely time for the big institutions to stand up and be counted and offer whole hearted support to the management, shareholders and employees of BP (LON:BP.) by actively buying the shares.
