ISA millionaires think the share price makes BP a buy. Are they right?

A few years ago, most investors seemed to think the BP share price was heading for the floor. And they’ve been wrong, so far.

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The BP (LSE: BP.) share price has had a tough ride since the pandemic. It’s down 12% over five years. And even in the past 12 months it’s been up and down erratically.

So which is it? Are oily hydrocarbons going the way of the dodo to be replaced by wind and sunshine? Or is the black stuff set to be with us for a long time yet?

What millionaires like

Looking at the top stocks picked by Stocks and Shares ISA millionaires is an eye-opener. It shows BP firmly in their top few.

It’s a more popular buy than among non-millionaire ISA holders. So why the difference?

Well, the millionaires are mostly those who have been doing it for a long time, ever since the old days of PEPs.

And that means they’re older. In fact, the average millionaire ISA holder is over 70.

Mature investors

Are they out of touch with the way the energy business is going? Well, hey, I’m old, and I’m not out of touch! How dare I say that to me?

No, in reality, I think it’s likely to be down to two main things.

One is that retired investors will be looking more for steady income. And though the forward dividend yield is at a fairly modest 4.5% now, BP has been a reliable payer for decades.

The other, I think, is that mature investors have a better ability to see the long term. After all, they’ve lived a lot more of it already.

Staying put

So they were less likely to bail out of BP shares and pile into renewable energy. And over the past decade, those who stayed put have probably done better.

Some who piled into high-flying alternative energy stocks could be nursing some losses now. And they won’t have any dividends to show for it.

Meanwhile, those who ignored the BP share price crash in 2020 will have seen it come most of the way back. Actually, the ISA millionaires were buying all the way through.

So they should be nicely ahead now.

What now?

Where do we go from here? Follow the millionaires and buy BP? Or seek out lithium stocks, wind farms, and all the rest?

Well, why not do both? Nobody is telling us we have to choose one or the other. When technology change is in the air, we can hedge our bets and put some money in each camp.

We don’t need to sell bricks and mortar retailers to buy high-tech online sellers. Both of those will keep going in parallel, possibly forever.

And I reckon we’ll see profits, and dividends, streaming in from oil even while a longer-term shift is underway.

Danger

In fact, even if I should buy oil stocks again, I think the safety hedge could go the other way. As the years go by, it could be the clean energy stocks that become the safer ones while oil demand gets riskier.

But I think we can profit from both sides of the change.

Diversification, that’s one of my favourite things.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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