Tuesday 20 February 2018 | ShareProphets: The one stop source for breaking news, expert analysis, and podcasts on fast-moving AIM and LSE listed shares
The January 2018 edition of the UK Investor Magazine is now live: Nine tips, defending Churchill, and not missing Nigel Wray
It was around a year ago that I wrote an article about one of my then tips of the year BHP Billiton (BLT) observing that the world's largest mining company had just made billions of dollars of losses...but correctly the share price was going up. Billiton was a nice solid pick for 2016 but so far this year the share has been more volatile than remunerative.
You cannot complain when one of your tips of the year has put on over 35% in the last eight-and-a-bit months, but it would be fair to say a month or two into the year even I wondered what I had let myself in for with BHP Billiton (BLT).
Hello Share Swipers. BHP Billiton (BLT) is a famous mining and oil producing company. It provides us with iron ore, copper, diamonds, aluminium, the ebony nectar and natural gas. I can imagine in my mind's eye many of you are now heading for the door. But hang on a bit. Not only is the oil price rising, but this company has been held down by issues which may have been overdone.
My first tip of the year has to come attached with a mea culpa. I tipped BHP Billiton (BLT) at 1000p a share a few months ago and after a suitable disclosure delay bought stock. Since then I have also bought shares below 900p, below 800p and reasonably recently below 700p per share. The clock does not completely reset with a new year but for those investors who joined me in investing at around the 1000p a share level I offer my apologies…but also my advice to double up now.
BHP Billiton (BLT) certainly hasn’t had much luck recently, with an environmental disaster adding to its low commodity price woes.
John Meyer of SP Angel this morning comments on BHP Billiton (BLT), Ferrex (FRX), Minera IRL (MIRL) and Noricum Gold (NMG) as well as offering a detailed macro view on the news that is shaping global mining and the AIM mining pond.
There are some events which transcend normal investment analysis. The shocking scenes of devastation over the last few days from the area around the Samarco iron-ore mine in Brazil following the unintended release of mine tailings received a lot of press coverage. As the co-owner (along with the Brazilian business Vale) BHP Billiton (BLT) correctly in a regulatory disclosure earlier today ‘offered its full support to help the immediate rescue efforts and to assist with the investigation’ and made its ‘immediate priority…the welfare of the Samarco workforce and the local communities’. None of this of course will bring back those who have lost their lives.
It has been a torrid time of late for mining companies in light of low commodity prices, and even the largest ones have struggled. A number of commodities have been showing signs of bottoming out or even having a bit of a bounce though, and with some of these big companies close to their lowest levels since the 2008 crash, I can see good value in some of them. Top of that list would be BHP Billiton (BLT), which is a company that I have covered before at higher levels and still see as a good longterm buy, even more so at the current share price of around 1041p.
On Tuesday, Chris Bailey offered some excellent analysis of BHP Billiton’s (BLT) results. I won’t attempt to steal Chris’ thunder, but one point he made has stuck with me. In its own words BHP Billiton’s board is “resolute” to pay what is now a 7.9% dividend. This is an enormous yield for such a large stock and if the directors follow through with this pledge, the current £10.55p share price is surely a gimme. The question is will the company pay this generous sum?
Who ever said that large cap equities could not be exciting? A quick glance at the share price graph of the world’s largest miner BHP Billiton (BLT) shows that even a miner with lowest quartile production costs, rising volumes, low debt and a progressive high single digit dividend yield can still struggle against the might of negative investor sentiment towards the space.
If there is one event that should fill investors with glee it is a spin-off. Here’s the theory: a big, complex company decides to allow part of their business to separately list which in turn allows investors to appraise and the market to value the now two separated businesses independently. And guess what? Sometimes 2+2 =5 and sometimes 2+2=3. In my experience it rarely leaves the combined market cap unchanged. This is because either the spin-off is an underappreciated diamond or it is a piece of relative rubbish that investors should run a mile from and dump in the first few weeks of spun-out ownership.
Miners have had a very bad time of late, but that can also lead to some long term bargains like BHP Billiton (BLT) cropping up.
The large mining stocks have in general been hammered over the past month or so, but I see that as a great opportunity to buy in cheap. One of my current favourites has to be BHP Billiton (BLT), which has seen more than 15% wiped off of its share price during that period.
I’ve been watching BHP Billiton (BLT) closely for some time now with a view to trading it. It is currently at close to a level where it looks a very tempting short, even more so if we were to see another little rise back to the 1950p to 2000p area.
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