Speaking at a Schroders investment conference in Edinburgh, Buxton (pictured) was inundated with questions from IFAs who have had to deal with concerned BP investors.
Buxton urged IFAs to tell their clients to remain calm even as shares fell over 40 per cent to 373p due to the spilled oil crisis.
Schroders income co-fund managers Nick Kirrage and Kevin Murphy increased their exposure to BP earlier this month within the firm’s £1.52bn fund. The pair say the long-term investment case in BP remains attractive at current levels and have increased their absolute weighting in the stock from 2.8 per cent to 3.5 per cent.
Buxton says: “Just shut your eyes, accept you have BP and accept you may not get a dividend payout for a quarter or two. But it is so cheap in relation to its balance sheet strength, its net asset worth and the value of what it possesses, you couldn’t possibly think about packing up now.”
Buxton says investors must see past the market emotion surrounding the leak.
He says the market has priced BP so low as if to assume the US government will seize all its assets.
He says: “At worst, the US government will tell BP it is an unacceptable operator and will ban it forever more. It would then be forced to sell to a US oil firm and that would get BP for a bargain, but it would pay something for it.”
Buxton predicts BP will be forced to suspend dividend payments until the clean up is complete or at least until the well is capped, but says any suspension will be down to political pressure only.
He says: “It does not need to suspend dividends at all, its debt level is below its target of 20 per cent, and even with all the clean up and fines, that would take it to 30 per cent. But with that it could still pay a dividend.
“It is purely down to political pressure with US senators telling it to stop paying out until the well is sealed or the oil is cleaned up. It will have to cut and hope to reinstate the dividend later, or even compensate for lost dividend earnings going backwards.”