It’s been a shaky start to the year for the FTSE 100. But I’m on the hunt for stocks I can buy today and hold in my portfolio for a very long time. I’ve got my eye on one in particular.
A strong contender
The stock in question is BP (LSE: BP). I first purchased shares in the oil and gas giant on 5 February. Today, I’m sitting on a 10.1% paper gain. It has had a strong start to 2024 and I’m fairly bullish on the long-term prospects of the stock.
After all, that’s why I decided to snap up some shares in the first place. I saw an opportunity that I thought other investors had been neglecting. So far, it’s paying off.
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Of course, this is a stock I intend to own for years and decades, so I won’t be gauging my success after just over a month. That said, there are a few reasons I like the look of it.
Cheap as chips
Let’s kick things off with its dirt-cheap valuation. As I write, I can pick up some shares trading on just 7.3 times trailing earnings. To me, that looks like good value for money. That’s below the average of the FTSE 100 as well as its peer group, which both sit at around 11.
Generous rewards
To go with that, BP boasts a 4.5% dividend yield. I could certainly find higher yields out there on the Footsie. I own a few, including Lloyds and Legal & General. However, it still sits above the index’s average of 3.9%.
What’s more, management has generous plans to reward shareholders. In the first half of this year, it wants to return $3.5bn via share buybacks. Looking forward to 2025, it intends to purchase up to $14bn worth of shares.
My concerns
I must admit, I was initially hesitant about opening a position given the industry BP operates in. The attention placed on the green transition means companies such as BP have come under massive scrutiny.
There are a few other issues, too. The oil industry can be volatile. And with volatility comes fluctuating share price movements. When oil prices fall, the BP share price tends to follow suit.
I’m still backing it
Nevertheless, it’s actually forecasted that demand for oil is set to rise this year. The International Energy Agency recently raised its estimate of 2024 oil demand growth by 110,000 barrels a day to 1.3m, due to an improved economic outlook for the US.
What’s more, I think investors are underappreciating the fact that companies like BP will be a central driving force in the energy transition.
As contradictory as that may sound, the business has the resources to invest heavily into creating a greener future. We’ve already seen this with the acquisitions it made to gain exposure to areas including solar energy.
On top of that, while the target for net zero emissions remains 2050, it’s now believed by many that this isn’t viable. With that in mind, society will likely be heavily reliant on traditional energy sources for the decades ahead.
At its current price, I’m optimistic the BP share price has ample room left for growth. If I had the cash, I’d happily add to my position today.
