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 Reports and Commentary from the Investment World

Reports and commentaries are posted here on a regular basis.


BHP Billiton revisited


The recent drop in oil and gold prices has pushed shares of the commodity giant, BHP Billiton, back to a price that makes it look great value again.

The fallout in commodity prices recently has given many inexperienced investors the jitters. But the commodity sector has always been volatile. Big swings in price are to be expected. BHP is a quality stock and its outlook remains very positive.

BHP is still remarkably cheap, at its current price. The company is trading significantly below its five-year averages for its price-to-earnings (P/E), price-to-book (P/B), price-to-sales (P/S), and price-to-cash flow (P/CF) multiples. This behemoth is trading on a P/E multiple of twelve, three times sales, and eleven times cash flow. At these levels, BHP is generating huge amounts of cash and profits.

Commodities, particularly oil and gold, are currently experiencing a correction. However, they remain in a bull market. In fact, stock-picking legend Jim Rogers believes we’ve got another nine years or so in our current commodity bull market. Rogers, founded the Quantum Fund with George Soros in the early 1970s. Commodity bull markets have historically lasted much longer than equity bull markets.

BHP is a diversified commodity play, as it produces aluminum, copper, silver, zinc, coal, manganese, diamonds, and titanium.

The other factor that bodes well for BHP is that its insiders continue to buy its shares on weakness. We should too. If you are not yet a holder of BHP stock, we suggest you buy now.

Check out our initial report on BHP in the archives dated December 2002.


Disclaimer: All the information above is provided as a service for individuals and institutions. It should in no way be construed as a recommendation as an investment. Investment decisions should be based on the risk tolerance and planning horizon of the investor. Market participants must understand that past performance is also not a guarantee or predictor of future results.