By Dan Ferris in the S&A Digest:
The U.S. Coast Guard, in its wisdom, has permitted BP to move forward with its next attempt to cap the blown-out well that's gushing oil into the Gulf of Mexico. BP is going to use a technique called a "top kill." That's when you pour drilling mud and cement into the hole. The mud slows it way down, and the cement seals it off permanently. I wish them luck.
With oil spilling into the Gulf, blood is running in the streets... BP's stock is trading for less than seven times trailing earnings, with a current yield of 8%. If history is any guide, the spill will cost BP hundreds of millions, which it will be able to pay. The spill is also likely to lead to new rules and regulations that'll restrict competition even more than the existing ones. That'll provide giants like Chevron, BP, and ExxonMobil with a bigger competitive advantage over smaller companies than they already have.
This could be a great opportunity to buy BP and the oil giants in general. I've recommended one of them in my Extreme Value World Dominator portfolio. It's cheaper than it's ever been and poised to take advantage of the huge opportunities onshore in unconventional natural gas plays throughout North America. It's one of the best-managed businesses on Earth, and one of the most profitable businesses in history. It's paid a dividend every year for more than 100 years and raised its dividend every year for more than two and a half decades.
With the way Mr. Market is acting lately, I'd put the World Dominator portfolio up against any long stock portfolio for the next few years. Most stocks, though they're down the last few weeks, are still way overpriced. The World Dominators are dirt-cheap. As a group, they're likely the best equity bargains in the world today. I run a list of my favorite World Dominators, with current buy/sell advice, on the last page of every Extreme Value issue.
To learn more about Dan's World Dominators, click here
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