Sahil Gujral submits:
Even famous investors can’t afford to ignore the obvious. In this week’s Barron’s, Whitney Tilson of T2 Partners justifies buying British Petroleum (BP) for his clients with two arguments:
- By paying 5x earnings, he bought a great company at a cheap price.
- Spill liabilities will be comparable in their order of magnitude to previous oil spills. (Citing the 1979 failure of Ixtoc I, the world’s second largest spill, which Pemex settled for $100M and Exxon-Valdez (XOM), for which the company paid only $500M after the Supreme Court knocked down a $5B judgment.)
True spill costs are already a spirited debate. My assertion here is more basic: Tilson did not buy BP when it was objectively cheap.
