I am recommending small long positions in BP and ADG.
I think the steady flow of negative news has caused BP’s stock price to overshoot to the downside. BP’s recent progress with its LMRP cap may turn things around.
From http://www.reuters.com/article/idUSN0714720620100607:
During the weekend, BP announced advances in controlling the undersea leak through a containment cap over the blown-out wellhead, giving estimates of captured oil that suggest a significant portion of the escaping crude is being collected.
There’s a lot not to like about ammunition manufacturer Allied Defense Group (ADG). It is losing money and it has received a “Going Concern” warning from its auditors. The company had been a takeover target (potential acquirer: Chemring Group PLC), but a DOJ indictment of a key executive responsible for much of its sales has scuttled the deal. However, the stock has dropped so much that the market cap is now only $23 mln, only about a third of the cost of this New Jersey mansion: http://wcbstv.com/local/million.dollar.mansion.2.1733780.html. I suspect that there may be substantial value in the intellectual property of the company and this value won’t be fully recognized until another major war breaks out.
I emphasize that long positions in these stocks should be small; ADG may well go bankrupt and the potential downside for BP is huge.
BP is currently quoted 37.72/37.73 and ADG is currently quoted 2.76/2.79.
