The Ignorant Investor

LONDON (MarketWatch) -- BP Plc on Tuesday reported a 22% increase in quarterly profit on the strength in oil prices and the demand for refinery services, though the rise fell shy of forecasts.

The U.K. oil explorer also said it could give up to $65 billion back to shareholders over the next three years if oil prices stay above $60 a barrel.

...[The] New York-listed shares declined close to 4%.

I've been a BP shareholder for many years, and so it was hard to see this headline come across my desk today. Just one of those examples where a company takes a hit from traders not because its losing money, but rather because it isn't making as much as people expected.

It's not just BP taking a hit at the time of writing. The Vanguard Energy Viper ETF (VDE) is down a couple of percentage points as well, so what we're seeing today is the energy market pulling back a little. I don't see it as a huge issue. Demand for oil is still looking strong over the near term (and despite what people say the near term is the only thing Wall Street really thinks about, I'd argue), and the factors I'm seeing cited by the press, stuff like inventory levels, warm weather, etc.- could lower the price for a barrel of oil significantly without returning it to anywhere near the low $20-30 range that oil investors fear.

But today's drop in oil stocks does raise my concern over being too exposed to energy. Given it's performance in 2005, both as an industry and as a driver of the S&P 500 aggregate profits, people like me are beginning to think of the energy stock as the solution to all of life's investing problems. The gift that will keep on giving year after year. That's a dangerous trap which I may or may not have the sense to avoid. Knowing when to pull money off the table and when to let it run is always a gutwrenching call for me, but it's especially hard when I'm dealing with a sector that is in the midst of a boom.