Formed in 2001, the merger between Broken Hill Proprietary and Billiton proved to be a decision that resulted in the organisation becoming one of the largest diversified commodity companies in the world. Posting $61.51 billion in revenue last year, the company has adapted to the change in demand for iron ore from international giants such as China. This consisted of lowering total costs, as they claim their Western Australian Iron Ore mines are the most cost-effective out of all their rivals. In terms of diversity their 2019 sales consist of 39% Iron Ore, 24% Copper, Coal 20%, 21% Coal and 13% Petroleum.
Stock price set to rise?
A Macquarie note explains how BHP financials for 2019 were very solid, and with Iron Ore prices high they are likely to have another substantial year. Macquarie set the price target to $43, a 5% increase from it’s current price at $41. This being said, Macquarie Bank is a very good investor of commodities as seen in their EOY financial reports. Therefore, it does give investors a sense of confidence that BHP is likely to succeed in 2020. To add to this, BHP has Multi-billion dollar projects underway such as the Spence Copper mine in Chile and the South Flank iron ore project in WA. BHP are also looking at the incorporation of driverless trucks on it’s Australian sites, which would be very cost-effective in the long run.
What’s a good entry price?
Before I start, I am obliged to remind our viewers that this is not advice only general commentary from my extensive research in this area.
A dip under $40 may be an ideal entry price as anything above might not be worthwhile however you must conduct your own research if you want to invest capital. In August 2019, you could have picked up BHP at $34.50 and made a healthy 12% in 9 months. If we look back to the past, if BHP does dip again to an entry below $35 it may be effective as we know BHP has bounced back from large dips due to speccing. If anything, keep BHP in your watchlist and see if any speccing does drop BHP into your personal buy-zone.
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The information above should not be taken as financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
Written by Tyger Fitzpatrick, founder of YIG.