Buy BP (LSE: BP.) shares when hydrocarbon fuels are becoming more hated by the day?
Well, while alternative fuels are a big priority, we’ll still need the dirty black stuff for a good while yet. And part of the effort is going into using the same raw materials, but more cleanly.
So what about the past five years? The BP share price is down 7%, but that hides a more complex story.
Five years ago…
If I really had put £10,000 into BP back then, I’d be down to £9,300 on the share price. That doesn’t sound too bad for a company that some say is set for oblivion.
I’d have had some good dividends too, and I’d be up to about £12,000 in total in the five years.
It’s not the best of results. But it does cover the pandemic years, and a lot of stocks have done a lot worse.
And, looking back, I could have done a lot better had I bought just after the 2020 crash. In fact, I thought BP shares were badly oversold and it would have been a smart move to buy some.
I didn’t though. Maybe I’m not that smart.
… and the next five years
But the big question is, what might happen next? And what might the next five years bring?
Let’s have a peek at what the broker forecasts say. They predict fairly steady earnings, which would put the stock on price-to-earnings (P/E) ratios of between six and seven in the next few years.
Less than half the long-term FTSE 100 average must make BP shares a buy, right? Well, maybe, but try telling that to bank shareholders sitting on lower valuations than that.
But yes, if these forecasts are close to the truth, I think BP shares could be good value now.
Zero-carbon
There’s one thing about BP that has me scratching my head a bit. In the company’s own words, it aims “to reduce to net zero the average carbon intensity of sold energy products by 2050 or sooner”.
So we have an oil and gas company trying to make its products carbon-neutral. To me, that sounds a bit like British American Tobacco aiming to become a non-smoking firm.
Or Tate & Lyle going sugar-free. Oh, it already did. And British American is pioneering non-smoking tobacco products.
The world’s turned upside down, I tell you.
Buy now?
So what do I think the next five years could have in store for BP shares?
Well, the transition away from hydrocarbons is still going to take several decades. So I don’t see a lot changes for the stock in the next five years.
I can see a decent dividend yield, and maybe more of a share price recovery.
But longer-term uncertainty might well hold it back. I think I’ll put my money into companies that aren’t going through such dramatic changes.
