So it’s nearly April and you haven’t used up all of this year’s ISA allowance? Or your wondering how to allocate the £11,760 you can add to your tax-protected portfolio when the next annual allowance comes into play?
You could do a lot worse than buying shares in companies that supply must-have products — after all, it’s going to be a very long time before nobody wants any oil or gas any more.
So how about BG Group (LSE: BG) (NASDAQOTH: BRGYY.US), the oil & gas producer with a sideline in liquified natural gas distribution?
Bad year
Well, you wouldn’t have done so well with BG shares over the past year, with a profit warning in January sending the share price crashing. It had been up nearly 15% over 12 months, but if you’d bought a year ago you’d now be sitting on a loss of nearly 10% — and at only around 1.5%, dividend yields are meagre.
Some of the firm’s problems are not of its own making. For example, having had to declare Force Majeure over the government’s diversion of its production in Egypt and being unable to fulfill some contracts was unavoidable. But production this year is down in the US and the Caribbean, too.
Looking back further, the BG share price has gained only about 5% over five years, while the FTSE 100 has picked up around 70%. And the chart has had plenty of ups and downs over that time — we only have to look back as far as October 2012 for an earlier cut in production expectations, which sent the share price down nearly 20% in a day.
But look back 10 years!
But, I really think ISA investments are best suited to the very long term, and over 10 years the BG share price has done very well indeed — it’s actually up around 230% with the FSTE 100 having achieved only around 50%.
By comparison, Royal Dutch Shell shares have gained a relatively unimpressive 80% over the same 10-year period. Sure, there’s a better dividend of around 5%, but it does show how good BG’s long-term performance has been.
With oil & gas exploration and production, bad times seem pretty much randomly distributed — like BP‘s Gulf of Mexico disaster. But even with a catastrophe on that scale, you’d still be in profit over the past 10 years with BP — and over 20 years you’d be ahead of the FTSE and have received better dividends.
Buy and forget
That’s why the sector really should be seen as a very long-term investment — just like an ISA. And with that perspective, BG has to be a strong candidate.
