Why BHP Billiton plc Should Be A Winner This Year

BHP Billiton plc (LON: BLT) could be set to recover in 2104.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I’m taking a look around some of our top FTSE 100 companies and examining their prospects for 2014. So, how is BHP Billiton (LSE: BLT) (NYSE: BBL.US) likely to fare in 2014, after having had such a tough 2013?

Let’s examine the miner’s performance over last five years’  together with the latest forecasts:

Jun Pre-tax EPS Change Dividend Change Yield Cover
2009 $11,617m 192.7c -30% 82c   3.7% 2.4x
2010 $19,572m 224.1c +16% 87c +6.1% 3.0% 2.6x
2011 $31,255m 393.5c +76% 101c +16% 2.5% 3.9x
2012 $23,022m 321.6c -18% 112c +11% 3.8% 2.9x
2013 $17,872m 221.7c -31% 116c +3.6% 4.2% 1.9x
2014(f) $22,414m 260.0c +18% 123c +6.0% 4.2% 2.1x
2015(f) $24,001m 284.2c +9% 131c +6.5% 4.5% 2.2x

Why is it down?

Along with the rest of the mining sector, like Rio Tinto who I took a look at earlier in the month, BHP Billiton has suffered a couple of years of weakening profits, hit by falling prices in the commodities markets. And that’s partly because growth in China has been slowing and demand for all that valuable dirt that BHP digs up has fallen.

Should you invest £1,000 in Prudential right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Prudential made the list?

See the 6 stocks

But look at what BHP produces — iron ore, oil & gas, copper, coal, potash, aluminium… Do we really think demand for such essentials is in anything like a long-term decline? No, of course it isn’t, because it’s stuff that the modern world is literally made from.

The share price

BHP’s share price is down around 15% over the past 12 months, to around the 1,795p level — while the FTSE has gained more than 10% over the same period. And if we look further back into the recessionary gloom, things look even worse — we see a decline of nearly 30% for BHP shares against a 12% rise for the FTSE.

But I reckon the BHP price really does look to have bottomed out. In fact, over the second half of 2012 it looked like the recovery might have been on, though bullish economic sentiment proved to be a little premature and the first half of 2013 took the price right back down again.

The recovery is on

But since summer 2013, things have looked stable, and it’s over that timescale that we really have been seeing pretty solid evidence of economic recovery. The eurozone isn’t going to collapse just yet (not this time, anyway), and the US Federal Reserve is confident enough to scale back its quantitative easing.

And China? Well, what do you know, it’s still there! And growth is starting to pick up again. And even if it wasn’t, China’s relatively slow recent growth of around 7.5% per year was still something that most countries can only dream of.

Undervalued, surely!

Forecasts for BHP Billiton already suggest a return to profit growth, and put the shares on a forward P/E for June 2014 of a little over 11, falling to nearer 10 based on 2015 figures. And dividend yields are expected to be significantly better than the FTSE average, at 4.2% for the current year and 4.5% next.

And that to me means the shares are too cheap.

Verdict: Off the bottom for 2014!

But there are other promising opportunities in the stock market right now. In fact, here are:

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

> Alan doesn't own any shares in BHP Billiton or Rio Tinto.

More on Investing Articles

Investing Articles

3 reasons Tesla stock may be a long-term bargain

This writer is keen to buy Tesla stock at the right price. He doesn't think it's there yet -- but…

Read more »

Investing Articles

Nvidia stock is a lot cheaper than before – or is it?

Nvidia stock has been caught in the whirlwind of market volatility. This writer has been waiting to buy, so might…

Read more »

Top Stocks

3 FTSE stocks Fools are eyeing up for choppy markets

A selection of companies listed on the UK stock market on the watchlists of four Foolish investors.

Read more »

Young Black man sat in front of laptop while wearing headphones
Investing Articles

A £10,000 investment in Rolls-Royce shares last week is now worth this…

Harvey Jones says Rolls-Royce shares couldn't escape the volatility of recent weeks, but wonders if the recent dip is a…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

Prediction: in 2 years these S&P 500 stocks will be much higher than they are today

These two S&P 500 stocks have been beaten down in recent weeks. But Edward Sheldon expects them to move much…

Read more »

Investing Articles

10% yields! Why a volatile stock market is great news for passive income investors

The recent stock market volatility has given passive income investors the chance to earn double-digit returns. But they still need…

Read more »

Close up of manual worker's equipment at construction site without people.
Investing Articles

Down 65% from its highs, this FTSE 250 stock is one to consider buying low

Shares in a strong FTSE 250 company going through a cyclical downturn have caught Stephen Wright’s attention as a potential…

Read more »

Investing Articles

£20,000 invested in a Stocks and Shares ISA 5 years ago is now worth…

Stocks and Shares ISA investors have reaped enormous returns since the pandemic, but how much money have they actually made?…

Read more »