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Now seems like an excellent time to buy. PA (LSE: BP) shares but there is one thing that stops me. A series of others FTSE 100 stocks are also very tempting, particularly insurance stocks. Aviva (LSE:AV). I don't have money to buy them both. Investing is about making decisions. Then what do I do?
BP's share price can be volatile. As with any commodity stock, it tends to go up and down in cycles. So when Russia invaded Ukraine and energy prices skyrocketed, its stocks followed suit.
I resisted the urge to chase him up. I'd rather buy stocks before they take off than after. Although it is not always easy. It involves challenging the herd, which is a struggle for even the most contrarian investor.
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BP shares have fallen 4.17% over the past month. They continue to increase in 12 months, but only by 7.69%. I don't think I'm buying at the top of the market.
They could slide further, but that's a risk I have to take. Buying exactly at the bottom of the market involves a great deal of luck. I am rarely so lucky.
But with shares trading at 7.1 times earnings, why wait? There seems to be a real opportunity today. Brent crude has fallen to a three-month low of $81 a barrel, down from more than $120 two years ago. Looks like a decent trigger.
The United States, Brazil and Iran have been pumping more oil, increasing supply. Interest rate increases have been delayed, slowing the global economy and hurting demand. Tensions in the Red Sea have increased shipping costs, but the impact has been less than originally feared. Will these trends be reversed? I have no idea. At some point I have to take the step.
Currently, BP earns a solid 4.6%, covered 3.1 times by its earnings. It is expected to reach 4.9% in 2024, with coverage of 2.7.
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Now seems like a good time to buy but you could say the same about Aviva. Unlike BP, its shares have been on a good run lately, up 21.74% in the last year.
Chief executive Amanda Blanc is reaping the rewards of her efforts to build a leaner, leaner and more cash-generating Aviva. Full-year 2023 operating profits rose 9% to £1.47 billion, beating forecasts.
Blanc also launched a £300m share buyback and increased the dividend by 8%. Aviva is forecast to return a spectacular 7.2% next year, crushing BP. However, dividend coverage is much lower, at just 1.3 times earnings.
Furthermore, Aviva's £300m buyback pales in comparison to BP's $1.75bn in the first quarter. That's on top of a whopping $7.91 billion buyback in 2023. After its recent good run, Aviva shares are more expensive than BP's, at 12.7 times earnings.
The stock price could rise further when interest rates finally start to fall, which should boost your asset management operations. Although BP would also benefit.
If money were no object, I would buy both with the goal of keeping them for years and hopefully decades. But investing is about choices, and I just made mine. I already have exposure to the insurance sector through Legal and General Group, and I have no energy stocks. My goal will be to buy BP in June. I'll be back for Aviva later.
