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Should I Buy BP for My ISA?

Alan Oscroft
March 13, 2013

LONDON -- What kind of shares should you be choosing for your ISA? Well, in my view the tax-efficient investment wrapper is best suited to decades-long investing in solid blue-chip shares. And for me, that means companies such as BP (LSE: BP) (NYSE: BP).

But first, remember that this year's allowance of £11,280 must be used by April 5, and don't forget within an ISA that all share-price appreciation is tax-free and there is no additional tax to be paid on dividends -- click here for more information on ISAs.

What about the disaster?
To many people, BP means disaster: the Gulf of Mexico oil spill, to be specific. And it certainly cost the company dearly -- as of BP's full-year results published on Feb. 5, the estimated total hit was $42 billion. And with various asset sales raising the cash to cover the costs, BP lost some downstream capacity and ended up with production 6% down and full-year profits 19% down.

But events such as the Gulf spill are not things we can predict, and there is always a risk of catastrophe in any investment we make -- which is one good reason for holding a diversified ISA portfolio. And anyway, just how badly did things actually go for BP investors?

Assuming you bought the shares five years ago, you'd have paid around 530 pence each for them. Today they're worth 453 pence, so you'd be down 77 pence per share, or 14.5%. But over the period, you'd have accumulated 113 pence per share from dividends, taking your current valuation up to 566 pence per share. Over one of BP's worst periods, you'd still have made a prof