Should I Buy BG Group for My ISA?

LONDON -- ISA season is upon us again! If you haven't yet used this year's £11,280 allowance for a stocks and shares ISA, you only have a short time left before the 5 April deadline.

Remember, you don't pay any tax on share gains held within an ISA, which means the high capital appreciation of a successful growth stock is sheltered from the reach of HMRC. (For more information about the tax benefits of ISAs, click here.)

Today, I'm going to tell you why I believe blue-chip oil and gas explorer BG Group  (LSE: BG  ) (NYSE: BRGGY) is a great choice for your ISA this year.

Overlooked growth
Many investors looking to build a diversified portfolio of U.K. blue chips don't look beyond the FTSE 100's top two oil companies, Royal Dutch Shell and BP. These super-majors certainly have their attractions, one of the biggest at the moment being dividend yields of more than 5%.

BG doesn't distribute as much of its earnings to shareholders as Shell and BP, and offers an income of just 1.5%. However, there are good reasons why BG keeps back much of its cash. Despite being a £40 billion giant, BG remains a growth company and prefers to reinvest the bulk of its earnings in the business to keep driving the growth.

Assets for growth
There's no doubt that BG owns valuable oil and gas assets with the potential to deliver superior earnings growth. In particular, the company's interest in the hydrocarbon-rich Santos Basin off Brazil could have investors dancing the Samba for decades to come.

The secret to success will be how well BG manages the commercialization of its largest and most valuable resource, but I believe the company's track record and the potential of the Santos Basin make for a favorable risk-reward outlook.

Growth at the right price
BG's shares have become out of favor with the market since last autumn as a result of the company revising down its production targets for the next couple of years.

In my opinion, though, the short-term horizon of many big institutional investors has created an opportunity for any private investor who is prepared to take a longer view to buy growth at a reasonable price.

At the time of writing, BG's shares are trading at 1,175 pence, which equates to a little over 14 times forecast earnings for 2013. But perhaps more significantly, analysts reckon the company could be valued at a discount of as much as 30%-40% to the true value of its assets.

Such a discount means that there's not only the potential for a significant rerating of the shares for long-term holders, but also the possibility of a premium bid for the company in the shorter term. Either way, the capital gains would be out of reach of the taxman for investors who had the foresight to hold the shares in an ISA.

Investing tax-efficiently and buying quality growth companies at reasonable prices are two of the tools investors like us can employ to build ourselves a million pound share portfolio.

The magic million is not the impossible dream you might imagine it to be, and if you'd like to know more about how you could achieve it, the Motley Fool's free report "10 Steps to Making a Million in the Market" is essential reading.

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