I am a shareholder in BP PLC who is concerned about the company's prospects, especially with its leadership issues.
- K.L., via the Internet
The giant oil company, formed by the merger of British Petroleum Co. and Amoco Corp. in 1998, has set the bar high with production growth targets that exceed those of its competitors.
It has an impressive portfolio of deep-water oil and gas projects and in liquefied natural gas, while its chemical operations are especially strong in Asia. A consistent performer, it hasn't had an unprofitable year in the past decade, and its disclosure of financial information has been admirable.
Despite the London company's positives, the oil industry's sharp earnings growth is slowing down, and BP finds itself dealing with a particular set of issues.
BP shares are down 5 percent this year after gains of 4 percent last year, 10 percent in 2005 and 18 percent in 2004. Oil spills in Alaska and allegations of improper energy trading, which it denies, have been concerns. It also derives more of its production from Russia than any other major oil company, an added political risk.
Most recently, an independent panel chaired by former Secretary of State James A. Baker III found that its U.S. operations had "significant" safety problems at five refineries. The report, commissioned after an explosion at BP's Texas City, Texas, refinery killed 15 workers, determined effective safety leadership had not been provided. Federal regulators have similarly been critical.
BP has settled several lawsuits and set aside $400 million to resolve legal disputes from that explosion. The total cost, including repairs and lost profits, is estimated to be about $2 billion.
Amid these issues, the analyst consensus rating on BP stock is currently "hold," according to Thomson Financial. That consists of five "strong buys," one "buy," 14 "holds" and one "underperform."
Regarding management, chief executive John Browne, who boldly built BP to a global powerhouse during a decade that included the Amoco merger, is stepping down this summer, a year ahead of schedule. He said the safety problems were his responsibility.
Tony Hayward, head of BP's exploration and production unit, will replace him. He is moving quickly to improve safety, including allowing an outside body to monitor safety for five years.
BP earnings are expected to decline nearly 2 percent in 2007. The three-year annualized growth rate forecast is for a 14 percent gain.
Should I keep my shares of Artisan International Fund?
- C.J., via the Internet
It's definitely not a run-of-the-mill foreign fund.
Highly respected portfolio manager Mark Yockey has run it since its inception 11 years ago. Because he detects potential growth in many more places than most of his competitors, the holdings are diversified across many sectors and regions.
While value funds have generally outpaced growth funds such as Yockey's in recent years, the patient manager's results have been solid. That success has attracted considerable money to not only this fund, but to institutional and separate accounts that he also runs.
The $11 billion Artisan International is up 20 percent over the past 12 months and has a three-year annualized return of 19 percent. Both results rank at or near the top fourth of foreign large-growth funds. "Artisan International gets our highest recommendation as a good core choice to build your foreign portfolio around," said Dan Lefkovitz, analyst with Morningstar Inc. in Chicago. "However, because of its large asset size, you probably shouldn't expect relative returns to look as good as in the past, because it can't be as flexible as it once was."
In seeking companies he expects to provide superior earnings growth, Yockey includes smaller developed markets and emerging-market firms and is willing to build up stakes in individual sectors. Those moves add some risk. Assisted by 10 analysts who pay close attention to stock price, Yockey often adds nontraditional growth stocks, such as banks and insurance companies, to his holdings.
More than a third of Artisan International's assets are in financial services. Telecommunications and consumer goods are other concentrations. Its top holdings recently were UBS AG and Nestle of Switzerland; RWE and Allianz of Germany; Credit Saison, Mizuho Financial Group and ORIX of Japan; Kookmin Bank of South Korea; Fortum Oyj of Finland and China Mobil of Hong Kong.
This "no-load" (no sales charge) fund requires a $1,000 minimum initial investment. Although its annual expense ratio of 1.2 percent is less than most no-load foreign large-cap funds, Lefkovitz believes it should be lower because of its significant asset growth.
My grandfather inherited stock when his parents died and now wants to give the shares to me. How does he calculate his cost basis, and how do I calculate mine?
- D.H., via the Internet
Cost basis is the original value of a stock for tax purposes.
When you inherit stock, your cost basis is the fair-market value on the date of the donor's death. So whatever the stock was worth when your grandfather inherited it is his cost basis. When you receive it as a gift, your cost basis would be the same as your grandfather's.
"It might make more sense in terms of tax benefit to have your grandfather hold onto the stock and include it in an inheritance, instead of giving it as a gift now," said David Bendix, a certified public accountant and certified financial planner with Bendix Financial Group in Garden City, N.Y.
Your grandfather's cost basis could be lower than the fair-market value of the stock at the date of his death. In an inheritance, you'd receive a "stepped-up" basis for tax purposes in which your basis is the fair-market value of the stock on the date of the donor's death.
Andrew Leckey writes for Tribune Media Services.