BP plc

01/19/2015 7:00 am EST

Focus: STOCKS

George Putnam

Editor, The Turnaround Letter

Our top conservative pick for 2015 is one of the world’s largest integrated oil companies; the company has suffered three major setbacks in recent years, but remains strong, notes George Putnam, editor of The Turnaround Letter

The first setback for BP plc (BP) was the 2010 disaster at the Macondo well in the Gulf of Mexico. The company has been involved in litigation and claims payments ever since. 

This should finally begin to wind down in 2015.  The market appears to be pricing in a worst case scenario for the remaining litigation and so any less dire outcome would give the stock a boost.

Setback number two is the escalating diplomatic conflict with Russia. BP has major investments in Russia including a 20% stake in OAO Rosneft, the giant, state-owned oil firm. 

Here again, the market is probably pricing in the worst and any thaw in relations with Russia would help BP’s stock.

And then there is the price of oil.  We certainly don’t have the expertise to forecast future oil prices, but our best guess is that they will turn up, perhaps sharply—sometime in 2015—and the stock will move up with them.

BP isn’t just standing still waiting for something good to finally happen.  The company is in the midst of a significant operational restructuring to reduce costs and boost efficiency.

Meanwhile, BP currently has a dividend yield above 6%.  While there is no guarantee that this generous yield will be maintained, the company just raised the dividend to its current level in late October, and so, it seems unlikely that they would reverse course and cut it anytime soon.

Overall, if any one of these negative forces abates in 2015, the shares should rebound nicely. If more than one reverses, the stock could soar.  In the meantime, the company pays a generous dividend to compensate you while you wait. 

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