BHP falls below $30

The headline says it all. Iron ore and petroleum are BHP’s two largest divisions in terms of both asset size and profit. The long decline in iron ore price and the short, vicious decline in oil prices are a painful combination for the world’s largest miner. Although the price is now below our previously stated buy price, we are in no rush to upgrade. Iron ore returns are still terrific at today’s price but BHP’s enormous shale oil and gas portfolio is under stress. Returns will fall and valuations deserve to be cheaper. We are sticking with HOLD but are...

The headline says it all. Iron ore and petroleum are BHP’s two largest divisions in terms of both asset size and profit. The long decline in iron ore price and the short, vicious decline in oil prices are a painful combination for the world’s largest miner. Although the price is now below our previously stated buy price, we are in no rush to upgrade. Iron ore returns are still terrific at today’s price but BHP’s enormous shale oil and gas portfolio is under stress. Returns will fall and valuations deserve to be cheaper. We are sticking with HOLD but are looking at BHP closely. We will restate a price guide following a more detailed review.

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