A rising tide may float all stocks, just not atthe same speed. Big companies carry much more ballastthan smaller ones, and typicallyrise and fall at a more leisurely pace. That hasdefinitely been the case for speedyoil explorer Premier Oil (LSE: PMO) and slowboatBP (LSE: BP) in recent months.
Premiers attraction
On 12 January, inthe heart of theglobal market meltdown, Premiers share price briefly slumped toa low of 19p. That same day, BP slumped to just 323p. If you had known what would happen next, you would have remortgaged your home and put all the proceeds on Premier. The stocknow trades at 73p, an incredible385% more than in January. BPs share price has also fought back bravely and it now tradesat 360p, a rise of a huge, um, 11%.
If youd staked your house on Premier recovering youwould be a wealthy investor by now, if all thosesleepless nights hadntkilled you. This was a truly risky play, hence the outsize rewards. Thecompany has group net debt of 2.68bn, not the sort of thing you want hanging over your head amida long-term oil price slump. Dontkick yourself for missing out becausefewwere predicting agalloptowards $50 a barrel in January. In fact Standard Charteredwarned the pricecould plunge to $10.
Float on
Premier has also been helped by its recent upbeat trading update, which putit on track to deliver at or above upper end of 2016 guidance of 65-70 kboepd. Fortunefavours the brave and youve left it late to get some Premier action. While $50 a barrel is better than $27 a barrel, it isnt enough to make thecompanys future completely secure. Premier has been furiously renegotiating banking covenants and needs the oil price to climb even higher. If oil retreats from here, and it cantbe ruled out, confidence could sinkjust as quickly as it rose.
Nobody would expect BP to shoot upas rapidly as Premier, because itsfuture was never in serious doubt (unlike its dividend). But you might have expected it to have fared slightlybetter in the recovery stakes. Management reckons it can make itssums addup at $60 a barrel, so maybe investors are waiting for the oil priceto hit that nice round number. It isnt so far away now.
Sail away
Maybe investors are so wary of the long-term share price disaster that is BP the stock is still 43% lower than it was a decade ago that they cantrouse themselves to believe in the company until they see surer signs of recovery.
BPs dividend,currently yielding a mind-boggling 7.42%, hasbeen living on borrowed time and although it isnt secure yet, things are looking up. At todays price,even if the dividendwas slashed by half it would still pay3.7%, with management hell-bent on reviving its former glories. Premier willoffer more short-term excitement if oil continues its recovery, but BP may offer greater long-term rewards. Youll sleep better too.
Scooping up top companies in volatilemarkets is just one way to get rich from stocks and shares, and there are plenty of other strategies out there.
This FREE Motley Fool report 10 Steps To Making A Million In The Market sets out how investing in stocks and shares over the long term can make you rich.
You don’t have to be a share-picking genius, ordinary people can become astonishingly wealthy by investing in stocks and shares.
This no-obligation report shows you how to do it, step-by-step. To find out more, click here now.
Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended BP. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.