|Shares of mining heavyweight BHP Billiton Limited (ASX: BHP) enjoyed a stellar year in 2016 and are off to a flying start again in 2017. While the shares have risen 1.3% today alone to trade at $26.36, they have gained an impressive 5.2% since they traded for $25.06 at the beginning of the year.
As has been the case with various other miners, including Fortescue Metals Group, Rio Tinto and Whitehaven Coal, BHP’s resurgence can largely be attributed to a lift in the price of iron ore and coal. Oil prices have rebounded nicely too, providing plenty of drive for the BHP Billiton share price.
If commodity prices continue to rise, or even if they remain stable at their current levels, BHP’s shares could have further to run. That said, investors do need to be aware that further capital gains from the stock (and indeed, dividends as well) will be largely dependent on that happening: if commodity prices decide to fall again, it could put a real dent in BHP’s prospects.|
|Was the right call. Top slice a few.|
|Load up time.|
|Copper/oil doing well for BLT tomorrow|
|Can you please give credit to where you have obtained your article.....the author is good but only part of the pitchure.
|By Paul Franke, Contrarian, long/short equity, special situations.
BHP is financially strong and well positioned at the 2016 commodity bust low.
The stock is trading at a long-term discount ratio relative to book value and trailing cash flow.
Shareholder value is increasing smartly with rising industrial commodity prices of late.
BHP Billiton is one the largest diversified natural resource miners in the world, mainly selling to Asian customers from its Australia headquarters. It serves four main markets - petroleum, copper, iron ore and coal. BHP is a subsidiary of BHP Billiton Group, with 65,000 employees around the world.
After suffering through 5-10 years of a painful commodity cycle bust, including low inflation rates globally, a great recession in demand, and serious oversupply issues in each commodity mined, the company appears well positioned to serve as a portfolio inflation hedge going forward.
With a $38 stock price today, lower than 10 years ago and considerably off its all-time peak of $104 in 2011, BHP investors are ready for brighter days. Rising smartly from the early 2016 commodity bust low under $20 per share, just a small change in underlying business fundamentals and expectations by investors has doubled its 2016 equity quote.
Long-Term Value Play:
Using Wall Street analyst consensus numbers, June 2016 fiscal year operating income per share of $0.46 is expected to double to $0.91 this year (June 2017), and almost double again by June 2018 to $1.66. After years of write-offs, mine closures, and asset restructurings, BHP still holds $54 billion in shareholder equity. Against $64 billion in total liabilities, the conglomerate is in excellent financial shape moving forward in the capital-intensive mining industry.
At an equity market capitalization around $100 billion presently, considerable value is still inherent vs. both book value and trailing cash flow. The 10-year average price to BV is close to 4x and CF a little over 10x. Compare that to today's 2x BV and 9x trailing CF ratios. If Wall Street estimates prove correct, one can easily project a $60-$70 target price for BHP by 2018, using history as a guide. A bonus for investors is the company has a decades long record of paying dividends. The indicated annual payout rate of $0.56 (1.5% dividend yield) could rise dramatically in coming years if commodity inflation takes off.
Commodity Inflation Hedge:
Not only does BHP Billiton have above average shareholder value right now, a strong balance sheet, large diversification of output/resources, and low overall costs, but it is gaining upside momentum as commodity prices have zig-zagged higher since early 2016. Iron ore has risen from $40 to $80 per ton the last 12 months, crude oil $36 to $51 per barrel, natural gas under $2.00 to well over $3.00 per BTU in the U.S., coal (depending on variety) +50% to +100%, and copper $2.10 to $2.70. Mind you this sharp increase has occurred during a period of relative U.S. Dollar strength, not weakness. Given any type of Dollar weakness, commodity upside in 2017 could be exaggerated dramatically HIGHER.
How much upside is left in BHP? Plenty for long-term investors. During the strong boom period for commodities between 2003 and 2008, the company's earnings rose 10-fold over five years. The stock price exploded from $10 to $95 over the equivalent span. One can argue the 2016 blow-out bottom in valuations was just as big a bargain versus 2003 or the great recession crash low of 2008-09. For long-term investors, especially those searching for a conservative hedge against commodity inflation or a lower U.S. Dollar currency, without oversized volatility or investment vehicle time decay, BHP is a unique choice.
Strong Momentum Trading Characteristics:
The last 3-6 months have been good to BHP investors. BHP is performing far better than the S&P 500 average large cap business, Gold Miners ETF and Oil Producers ETF, while performing almost as well as its higher leveraged mining brothers & sisters in the Basic Materials Mining ETF and Coal Mining ETF.
Of particular note for BHP is a robust buying trend in the On Balance Volume [OBV] indicator. In a nutshell, sellers have been few and far between since September, when measured against increasing buying volumes and investor enthusiasm.
From late 2016, any strength in commodity pricing will go directly toward BHP's bottom line, increasing profits and sales per share disproportionately, all else being equal. Investors in the company have moved from a truly pessimistic view of the company at $19 per share in January to a more realistic outlook in coming years. The result has been a rough 100% gain in price to $38 today. The strong momentum since the summer has my Victory Formation momentum system pointing to BHP as a great buy idea on weakness. Specifically, a drop to $35 or $34 a share would be a welcome entry point for new long purchases. Nevertheless, a quote decline may or may not occur soon. If you are in need of a good uncorrelated hedge idea in a financial asset portfolio of stocks and bonds, BHP Billiton Limited should definitely be on your radar screen for additional review.|
|By Kevin George, Long/short equity, currencies, commodities.
Miners continue their rebuilding efforts:
Despite a strong rally in mining stocks over the last few months BHP Billiton and Rio Tinto still find themselves down 48% and 19% respectively over a 5 year period.
Slowing global growth, particularly in China, has hammered the price of commodities in that period and led to heavy losses for the mining giants. Commodities have since seen a strong revival this year and many hope that we have seen the bottom in these stocks.
Some caution is still advised as analysts such as Credit Suisse and Goldman Sachs see Iron Ore prices falling back in the first quarter of 2017, while oil prices still fight to hold above the $50 level.
Historical ratios favor BHP:
Since we mentioned the losses seen over a 5 year period, it is worth looking back at the 5 year historical ratios for both companies in order to see which company has weathered the storm more effectively.
Both companies have a similar gearing but it is BHP Billiton who come out on top in the key measures such as return on assets, investment and equity showing wide margins versus Rio Tinto. BHP also shows similar strength in profitability ratios and efficiency so if commodities really do continue their upswing we can assume that BHP will make better use of their revenues and asset base and the recovery in stocks may be similar to the 2:1 drop in price that we saw between the two companies since 2011.
Although BHP has paid higher dividends historically, management may choose to de-lever the balance sheet before committing to further shareholder rewards. Both companies are committed to increasing cash flows through increased productivity on their existing asset base and this is where BHP's efficiency in recent years could see them outperform.
If the analysts are right then a pull back in Iron Ore would be more detrimental to Rio Tinto than BHP. Once the current speculative rally on Trump's economic plans recede, it may be oil & gas that benefits through the recent OPEC production cut plans, which would be another win for the more diversified Billiton.
BHP continued their commitment to deepwater oil recently, becoming the first foreign company to partner with Mexico's state-owned oil company to develop the already discovered Trion field, defeating BP to the prize.
Trump tariffs and the 2017 outlook
After navigating the worst of a commodity storm, the world's largest mining firms now face another "black swan" event in Donald Trump's threat of tariffs on China; a country which accounts for 41% of BHP's earnings.
President Trump had threatened blanket tariffs of 45% on Chinese imports which left many concerned of future trade wars. BHP Billiton's President, Andrew McKenzie, commented that; "the whole world will start to be in complete trauma if tariff levels of that size and magnitude are put on across the board".
It remains to be seen if this was more bullish rhetoric from the incoming President, however it is another cloud hanging over the recovery in mining stocks until the matter is clarified.
The commodity story in 2017 is likely to be one of stability and consolidation with the worst of the drama over, however another threat to this picture is the surging U.S. Dollar, which again may see further inflows if Donald Trump's revolutionary plans for taxes etc can stimulate the economy and bring offshore cash and hot money into the United States economy.
The worst of the losses in commodity stocks seems to be over and it looks likely that the world's big mining companies will be able to repair their balance sheets further and see continued gains in stock prices.
More stability in commodity prices will increase cash flows and continued cost-cutting efforts to leverage their existing asset bases should put both companies on a stronger footing for the new year.
The real threat to these firm's strength next year seems to rest with incoming President of the United States, Donald Trump, whose threat of tariffs on Chinese imports would see a bloodbath in commodity stocks. Likewise the desire to charge up domestic growth could see continued surge in the U.S. dollar, which would weigh on further commodity price gains.
BHP Billiton's efficiency over Rio Tinto makes it the pick of the two but the key question will be whether investors are willing to call "The Donald" bluff.|
|not often you see action like this outside of an intraday chart with an algo buying causing a sustained 45 degree rise, impressive however mature|
|It´s this time of year again when the pundits make their predictions for next year.
They´re saying they expect gold and silver to trade a little lower while forecasting the price of Copper, Iron Ore and Thermalite Coal to be substantially higher in 2017 compared to 2016 which bodes well for BLT, Zinc is also expected to carry on doing well.|
|Zinc as someone has said is good and now we have oil in the the Gulf of M to help profits along............good deal I am told at sensible prices.|
|Buy on any dips,as we have a long way still to go.|
|Spot price for Zinc now nearly $2,700 per ton. What could of been when it comes to ZOX, too small and under funded to with stand a short term drop in the Zinc price to $1,450 per ton.
Dominic Frisby - Today we turn our attention to a metal which often passes without notice.
It isn’t glamorous like gold or silver, nor is it rare like platinum or rhodium.
It isn’t controversial like uranium, strategic like tungsten or cobalt, nor even widely talked about like iron or copper.
But it has, quietly, had a stellar 2016. It’s currently up almost 60%.
Today we’re talking zinc…
Zinc is in short supply:
Having started 2016 at just over 70c per pound, the zinc price currently stands at $1.17 a pound.
All of the usual factors have been driving the price. Firstly, there’s a lack of supply. China is the world’s top producer, contributing some 37% of global supply last year. However, last year it shut down some 26 lead and zinc mines for environmental reasons.
In addition, Australia’s Century mine and Ireland’s Lisheen mine, which between them produced about 5% of the global supply of zinc, have shut down due to depletion. Meanwhile, Glencore Xstrata’s Perseverance and Brunswick mines also recently closed.
As the zinc supply has dwindled, so the price has risen – and there’s nothing like a rising price to bring in more buyers.
After iron, aluminium and copper, zinc is the fourth most used metal in the world. (Although be aware that in some years this title falls to titanium). Annual zinc demand stands at 13.4 million tonnes.
Per year, it is a $34bn market. To put that number in some kind of perspective, silver is about an $18bn market and platinum just $8bn. Copper meanwhile, is closer to $150bn.
What is zinc used for?
The main uses for zinc are as follows.
Galvanising: this is the most important use for zinc, accounting for about 50% of annual demand. Iron and steel are coated in zinc to prevent rust. Galvanised steel is one of the strongest construction materials there is. It’s used to make the frames of large buildings, bridges, beams, piping, roofs, staircases – you name it.
Batteries: the world’s first battery – invented by Alessandro Volta in 1799 – used zinc as an anode. Zinc is still used in all kinds of batteries, from cheap to expensive: zinc-air (such as in hearing aids); silver-zinc (used in the aerospace industry); zinc-bromine (for energy storage); and plain old alkaline batteries – such as the AAs I have in my computer’s mouse.
Solder: zinc, lead and tin alloy is used to join electrical components and pipes.
Nickel-silver: this is actually zinc, copper and nickel, and is used in keys, zips, silverware and musical instruments (brass requires zinc).
Almost half of annual zinc demand comes from China, which is still building buildings and bridges, despite its economic slowdown. And if Donald Trump’s proposed infrastructure splurge comes to fruition, you can expect US zinc demand to grow considerably in the coming years. Zinc is a beneficiary of government infrastructure spending.
How to buy zinc:
The simplest way to invest in zinc is to buy one of the zinc exchange-traded funds (ETF Securities offers a London-listed one under the convenient ticker ZINC) or to buy it via a spread bet. All the usual risk warnings apply (particularly to the spread betting).
Alternatively, you can go down the individual company route. BHP Billiton (LSE: BLT) is the world’s largest producer – although, of course, it produces many other commodities as well, so it is not a pure zinc play. I like BHP and, like zinc, it is in a strong uptrend. At 1,326p it has more than doubled from its lows of below 600p at the start of the year.
A purer play might be Griffin Mining (LSE: GFM), which owns just under 90% of an operating zinc-gold mine about 300 miles north-west of Beijing. However, while I’m mentioning the company, that does not constitute a recommendation – if you’re keen on the theme, then it’s one to do your own further research on. Otherwise I’d stick with one of the bigger players.
According to a report on Bloomberg, the Bloomberg Commodity Index posted its biggest three-day advance since June, with Goldman Sachs saying investors should bet on higher prices in the next year as manufacturing picks up around the world.
“Faster growth should bolster demand for commodities, and help pave the way for higher corporate profits.”
“You’re seeing some strength across the board. That’s a healthy sign and indicates to me that we’re in a bull market.”|
|Broker Forecast - Deutsche Bank issues a broker note on BHP Billiton PLC
Deutsche Bank today reaffirms its hold investment rating on BHP Billiton PLC (LON:BLT) and raised its price target to 1350p (from 1260p).
Broker Forecast - Macquarie issues a broker note on BHP Billiton PLC
Macquarie today reaffirms its outperform investment rating on BHP Billiton PLC (LON:BLT) and raised its price target to 1530p (from 1470p).|
BHP to continue mining throug christmas|
|Trump and brexit shares for the ride upwards of the new spending era.|
|smart move . Unexpected fall today .|
|Took profits AM
|Strength going to 14:00 then breaking nicely with positive news from commodities and government spend|
Rather a trend here of late + + +|
|From USa / UK
Infrastructure investment what the governments have said|
|Another great start to the day. AAL off the block equally fast.|
|Dow up 200
What will BLT go to
Whats the potential is a give away the high of BLT
Watch the markets and sentiments
The trend is your friend here,to £?|
|Did the market get trump wrong +50 point from - 381|