Aug 6, 2021

Investors’ Chronicle: Greggs, BP, Direct Line

BP has announced a buyback plan of $1bn per quarter if the oil price stays above $60 a barrel. Jefferies analyst Giacomo Romeo said BP had gone to "The high end" of the sector in terms of shareholder pay-outs, with an implied yield of 10 per cent at $60/bbl. The longer term picture, including a 41 per cent drop in share price in two years while the FTSE 100 dropped 4 per cent, is a better indication for us than the recent run-up. Direct Line personified this paradox better than most with an improvement in its loss ratio of 4 percentage points to 57 per cent, mainly because motor claims were half of normal levels during the second quarter. Since then real GDP has fallen by 2.7 per cent while trend supply should have risen 3.8 per cent, implying output is now more than 6 per cent below trend.

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