BP, A Buy, Sell, or Hold at $45?

With BP (NYSE: BP) trading right around $45/share in after hours trading this afternoon, many are wondering if there is a short term trade here or a long term investment opportunity.

In the longer term, there is probably a solid investment here. From recent highs BP has now lost 25% of its market cap (roughly $47B worth). The Exxon Valdez will cost Exxon approximately $2B-$4B (with court cases and costs still not final to this day!). Even assuming 4X the cost of the Valdez to BP the drop in market cap seems excessive.

In addition, with a conservative earnings forecast for the years ahead, a price right around $48-$52 for BP shares seems very reasonable on a fundamental basis (Once the smoke -or more accurately, oil- clears).

In the shorter term BP is trading on the spill, and recently on the 'top-kill' success or failure. If BP or the government confirms its success tomorrow you should see $46-$47 pretty quick. If it fails, a move back to $40-$42 is possible.

For a long term investor, an entry here is probably ok, although with VERY high short term volatility. A good idea would be to move 1/2 your desired final position in, and then wait and see on the top kill results. Any short term trade attempt from here is a 'roll of the dice'.