OK we called it wrong on BP. We still may be right, and the fundamentals look good, but management is all important at times of crisis and when you’ve got an American President who seems to blame the British for everything, a Swedish chairman who tells everyone that he really cares about “the little people” and a chief executive who says that he wants to get his “life back” then you are looking at a lot of trouble. And despite a recent relief rally, BP’s management has let down its shareholders. It may be oversold, but it’s oversold for a reason.
So we hesitate to recommend another B, this time BA. The arguments are almost the same. There’s a current squall, in this case a fight with its Heathrow based cabin crew and a business that is in a growth industry and with, finally, a grip on costs. It also has a strong management team and a divided union fighting it.
Unite, the union that is behind the current strike, is finding it hard to hide its irritation with its militant branch called the British Airlines Stewards and Stewardesses Association (BASSA) and realises that it needs some capital with the public if its going to hold the public to ransom over the public sector cuts that the bulk of its membership are going to suffer. And there’s the small matter of its ties to the Labour Party, which means that there will be enormous political pressure from a party that does not want to be seen as a stooge to the unions.
So sooner or later the strike will crumple and the union will be broken. BA will be a good stock to buy again. BP is still a long term bet due to its weak management, but BA has a strong management team and is set fair to break the back of the union. Go long.