BP PLC (ADR)

Last night I initiated a small position in BP (ADR).

Reasons:

1. Max loss estimated is $15B. Given that 1 ADR is equivalent to 6 shares, there are 3B outstanding shares. As such, every $1 loss in stock price = $3B loss in equity value of the company. A $15B damage should rationally be translated to $5 loss in share price. Since the accident happened on 22nd April, BP share had dropped from $59 to yesterday's $47, a loss of $12. This is over-reacting
2. This lost is likely to only pay out many years later, referencing Exxon's case: http://en.wikipedia.org/wiki/Exxon_Valdez_oil_spill
3. BP's PE ratio of 8 is the lowest in the industry
4. BP has positive free cash flow for the past 5 years (i did not look further than 5 years)
5. BP is unlikely to fail because of this $15B loss, which is about slightly less than 2009's PROFIT.
6. BP has high dividend yield of 6%
7. BP is trading at slight below book value

Views are my own. Please do your own due diligence before committing the investment =)