News and Finance

Please comment on the prospects for stock of BP PLC. I did not envision its decline.

Lower oil prices make two groups unhappy: oil companies and their shareholders.

The world’s third-largest oil company has reduced its production forecast for the next several years and is reviewing its degree of investment in major projects around the world.

Because of lower oil revenue, all oil companies will need to assume increased debt in coming years to cover dividends, capital spending and exploration costs, BP Chief Executive Tony Hayward has warned.
Hayward estimates oil prices must reach $50 a barrel to cover this year’s dividend and $60 to cover both the dividend and investment in projects.

BP will continue to pay a dividend, Hayward has said. Although the firm has a large cash cushion from years of profitability, some analysts question his decision.

London-based BP’s shares are down 26 percent this year following last year’s 36 percent decline. The company had a loss of $3.3 billion in the 2008 fourth quarter as it sold its oil and natural gas at prices 37 percent lower than a year earlier.

History suggests there eventually will be an economic recovery, demand for oil will rise and higher prices will follow.

BP, which grew from the 1998 merger with Amoco, also acquired Arco and Castrol in 2000. It has vast global reserves, including significant production from its joint venture in Russia, where political risks are high.

BP earnings are expected to decline 43 percent this year and 35 percent next year. The five-year annualized return is projected to be 5 percent.

What do you think of American Century Equity Growth Fund?

Computers call the shots at this large growth-and-value fund that seeks to beat the performance of the Standard & Poor’s 500 index.

It has been able to accomplish that goal since manager Bill Martin took charge in 1997. Martin and fellow manager Thomas Vaiana, who joined him in 2000, run and update the quantitative models, while computers handle stock selection and portfolio construction.

The $1.5 billion American Century Equity Growth Fund is down 41 percent over the past 12 months to rank near the upper one-third of large growth-and-value funds. Its three-year annualized decline of 16 percent places it just above the midpoint of its peers no fax cash advance.

"This is basically a 100 percent quantitatively-run strategy using three main models that are weighted based on what is going on in the market," said Karin Anderson, analyst with Morningstar Inc. in Chicago. "Valuation, momentum and sustainability are the models used to pick the best candidates from the S&P 500."

American Century Equity Growth Fund owns about 200 stocks and has higher-than-average portfolio turnover. In the current market climate, its models place a heavier emphasis on factors indicating financial strength, such as low debt and solid efficiency. It is conservative and doesn’t have the volatility of some other funds.

Energy, financial services and health care each recently represented about 15 percent of the fund’s portfolio. Largest stock holdings recently were Exxon Mobil Corp., Johnson & Johnson, Procter & Gamble Co., Microsoft Corp., Chevron Corp., Pfizer Inc., AT&T Inc., ConocoPhillips, Wells Fargo & Co. and Wal-Mart Stores Inc.

The no-load fund requires a $2,500 minimum initial investment and has an annual expense ratio of 0.67 percent.

I now hear all the time about cash investments. What exactly are these?

Cash investments are short-term instruments that don’t lose value and can be quickly redeemed.

Although their interest-rate yield is low and also temporary, they gain in popularity during periods when other investments have been tumbling in value. Every portfolio should have some cash investments to cope with emergencies.

"People are getting more concerned about the return of their money than the return on their money," said Marilyn Capelli Dimitroff, certified financial planner and president of Capelli Financial Services Inc. in Bloomfield Hills, Mich. "Cash investments offer the ultimate safety and liquidity."

Among the cash choices offering immediate access to your money are money-market funds, bank money-market accounts and checking accounts.

andrewinv@aol.com

2009, TRIBUNE MEDIA SERVICES INC.
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