BHP: facing the falling knife

It’s sliced cash from many investors in the past 12 months – BHP management’s next moves are crucial.

Summary: BHP Billiton’s half year result included a pre-tax loss of $US5.67 billion and a revision of its progressive dividend policy. Investors should ask whether the company is going a similar way to other resources giant, Anglo America, given both are exposed to flooded commodity markets. Investors should seriously consider how long the commodity downturn will last, whether they believe in BHP’s management’s ability to seriously the situation around, and what the opportunity cost of sticking to the stock would be should it take a significant period of time to recover.

Key take out: Management at BHP should be learning from Anglo American’s mistakes – even so, BHP investors should treat the stock more carefully than they have before.

Key beneficiaries: General investors. Category: Commodities.

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