I'm searching for good investments to make in 2013. In this article, we'll take a look at BP (BP). We'll take a look at BP's historical share price performance as well as its financial performance. Also, we'll evaluate BP from the perspective of a technical analyst.
We'll use descriptive statistics by taking a sample of the population of monthly returns of BP. At this point, we won't make any statistical inferences. Some of the sample statistics will include the arithmetic time-series mean, and the time-series median. Also, we'll take a look at a histogram. We'll also discuss the absolute frequencies, relative frequencies and cumulative relative frequencies of the return profile. Further, we'll determine the geometric mean return and the modal interval. The sample will consist of monthly returns between 2000 and 2012.
The arithmetic time-series mean monthly nominal return was 0.5 percent. The time-series median monthly nominal return was 0.5 percent.
One of the nominal monthly returns was between -35 percent and -30 percent. Seventeen of the nominal monthly returns were between -10 percent and -5 percent. Forty-seven of the nominal monthly returns were between -5 percent and 0 percent. Forty-nine of the nominal monthly returns were between 0 percent and 5 percent. Twenty-three of the nominal monthly returns were between 5 percent and 10 percent. Five of the nominal monthly returns were between 10 percent and 15 percent.
About 30 percent of the nominal monthly returns were between -5 percent and 0 percent. Further, almost 32 percent of the nominal monthly returns were between 0 percent and 5 percent. A little over four percent of the nominal monthly returns were between -15 percent and -10 percent. Finally, almost 15 percent of the nominal monthly returns were between 5 percent and 10 percent.
That said, almost 47 percent of the nominal monthly returns were between -35 percent and 0 percent. That means the other 53 percent of the nominal monthly returns were 0 percent or higher. The modal interval was 0 percent to 5 percent.
The time-series geometric mean nominal monthly return or time-series nominal monthly compound growth rate was 0.2 percent. The nominal geometric mean monthly return on a bond equivalent basis was 2.4 percent. The nominal geometric mean monthly return on an effective annual yield basis was 2.43 percent.
Exxon's (XOM) time-series geometric mean nominal monthly return was 0.7 percent. That said, I think there is a good probability that BP will outperform in the coming months or years. In other words, BP's returns should catch up with Exxon's.
The return profile was adversely impacted by the oil spill.
Next, we'll compare some of those sample statistics with the sample statistics of the S&P 500 during the same period.
The arithmetic time-series mean monthly nominal return on the S&P 500 was 0.1 percent. The time-series median monthly nominal return on the S&P 500 was 1 percent.
The geometric time-series mean nominal monthly return or time-series nominal monthly compound growth rate on the S&P 500 was 0 percent. I'm sure you can calculate the nominal bond equivalent yield and nominal effective annual yield on the S&P 500: they were 0 percent.
Thus, BP outperformed the S&P 500 between 2000 and 2012.
The sample standard deviation of nominal monthly returns on BP was 7.6 percent. The sample standard deviation of nominal monthly returns on the S&P 500 was 5 percent.
BP's nominal monthly return distribution was positively skewed and leptokurtic.
BP's total revenue grew at a nominal compound annual growth rate of 11 percent between 2003 and 2011.
BP's net income grew at a nominal compound annual growth rate of 11 percent between 2003 and 2011, excluding 2010, the year of the oil spill.
BP's dividend per share increased at a nominal annual compound rate of 1 percent, including 2010's dividend cut.
In other words, since at least 2003, the firm has grown faster than the economy. Further, sales and net income have appreciated at a faster pace than the share price.
Also, BP is growing faster than Exxon, but it is trading at a discount to Exxon.
Between 2003 and 2011, Exxon's net income and revenue grew at 9 percent.
BP may continue to grow faster than the economy. Professional investors should monitor the firm's financial performance and financial position as BP could outperform the broader market.
The firm is valued at 0.36 times sales and 7.85 times trailing earnings. During economic expansions, cyclical firms typically trade at lower premiums. That said, there is plenty of room for multiple expansion..
Exxon is valued at 0.83 times sales and 9.37 times trailing earnings.
Chevron is valued at 0.89 times sales and 9 times trailing earnings.
Said differently, there is room for BP's multiplier model valuations to increase substantially.
As of writing, the dividend yield is 4.99 percent. Also, the debt to equity ratio is 0.42.
The quick ratio is 0.90 and the current ratio is 1.25. BP has a market cap. of roughly $138B.
Shares of BP are trading above the declining 50-day simple moving average. The market for shares of BP may be beginning an intermediate-term advance that should re-test the $50 zone.
BP is trading in a corrective wave of primary degree. The minimum implied measured objective of the corrective wave is in the $55-60 zone.
The MACD is conforming the corrective wave in the share price of BP.
Also, the broader market remains in a Dow theory bull market.
Finally, the Dow Jones industrial average and S&P 500 are trading above the 50-day simple moving average.
Disclaimer: This article is not meant to establish or continue an investment advisory relationship. Before investing, readers should consult their financial advisor. Christopher Grosvenor does not know your financial situation and ability to bear risk and thus his opinions may not be suitable for all investors.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.