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In respect to the reference of a P/E of 2
This in all likelihood would not be the case, as price would not fall so drastically unless......earnings were seriously impacted.

Commodity producers, miners, in this example are cyclical businesses currently due to China, there is a resource boom, or bullmarket.
Bullmarkets, do not last forever, unless, this time is different.
Therefore, in a commodities Bear market, with falling earnings, and pessimism ruling the day, $8.00 is a possibility.

That would represent excellent value, and this is in essence what value investors look for, buying when everyone else shuns the security.

If it never reaches that price, and it forever increases in value, so be it.
Do you know of a stock that only went up, never came down?
IBM, a great growth stock for 70+yrs, had some truly amazing retracements in it's price history etc etc etc.

jog on
d998
 
I agree ducati, and what goes up must come down, and of course BHP may go down, it is so huge and so valuable already it would be bloody difficult to double, and not too hard to halve in price.

However as it is it is a good buy and $40 is a reasonable price to 'hope' for. $8 is unrealistic.

I'm bullish on BHP for the moment, and would not be surprised tomorrow if it went close to $30 - was the announcement after hours? I think it was, will be interesting what it does overnight.

What companies do you recommend people buy instead of BHP?

Your philosophy is correct, bloody hard to implement though, if you are gonna wait for BHP to be $8 you may be waiting a long long long time.
 
I still own some shares, but did sell the call warrants earlier today.

That way it's a win-win situation for me: if the price jumps up now because I've sold the warrants, I'll win with the shares, but if the price drops further, well at least I got out of the warrants at a decent price. :D

GP
 
Realist said:
I own more BHP than any other shares*, infact twice as much as any other share. :)

I have about 20 shares at the moment.

*except one Nasdaq stock..
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Umm, Realist, do you mean that you own 20 whole shares in BHP, or am I misunderstanding you and you actually mean that you have shares in 20 different companies?

Julia
 
YELNATS said:
Goodonya realist. I do enjoy your posts. chuckle chuckle. regards. YN.
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My fan base has just grown 100%..

The other fan is a handsome value investor dude with a 70's blonde harido. ;)
 
Julia said:
Umm, Realist, do you mean that you own 20 whole shares in BHP, or am I misunderstanding you and you actually mean that you have shares in 20 different companies?

Julia
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Reading it again, i think the latter is true...

He would own many-fold more times BHP than 20; from all the money he saves from having no mortgage.... :D
 
Julia said:
Umm, Realist, do you mean that you own 20 whole shares in BHP, or am I misunderstanding you and you actually mean that you have shares in 20 different companies?

Julia
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I wish I had 20 whole shares in BHP, I only have 19. :(





;)
 
nizar said:
Reading it again, i think the latter is true...

He would own many-fold more times BHP than 20; from all the money he saves from having no mortgage.... :D
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True.

Man I love renting, my dryer sh*t itself this week, phoned the landlord and a new dryer was delivered today.

Do not dis renting, it rocks! :D
 
Realist

I agree ducati, and what goes up must come down, and of course BHP may go down, it is so huge and so valuable already it would be bloody difficult to double, and not too hard to halve in price.
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A combination of fundamentals & sentiment drive financial markets. Therefore, in a scenario of poor fundamentals & poor sentiment, $8.00 is possible, notice I didn't say probable, just possible.

However as it is it is a good buy and $40 is a reasonable price to 'hope' for. $8 is unrealistic.
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I try to avoid *hope* as much as possible, she's precocious.

I'm bullish on BHP for the moment, and would not be surprised tomorrow if it went close to $30 - was the announcement after hours? I think it was, will be interesting what it does overnight.
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I would never have imagined that. Overnight was not kind to BHP in the US markets.

What companies do you recommend people buy instead of BHP?
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My selections are on public display on reef.
I may update the thread on ASF

Your philosophy is correct, bloody hard to implement though, if you are gonna wait for BHP to be $8 you may be waiting a long long long time.
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Not at all, as there are almost always opportunities that are undervaluations.
Incidentally, have you calculated your depletion rate on your investment?
If you have, you'll understand why $8.00 is realistic.
If not, then you will have been guilty of overpaying for inventory in the ground.

jog on
d998
 
Freeballinginawetsuit said:
Gee Realist dont you own whitegoods either
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Nope..

The landlord owns the dryer. Why would I want to own a dryer? :confused:

They are poor investments, unlikely to increase in value. ;)
 
Realist said:
Nope..

The landlord owns the dryer. Why would I want to own a dryer? :confused:

They are poor investments, unlikely to increase in value. ;)
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I like the way you think :)

I bet you depreciate everything and anything you're eligible too and you have a lease on a car etc...

Perhaps you can leverage up your 19 using CFDs or warrants? Maybe exchange your BHP shares to instalment warrants and use that widely promoted (by the asx) strategy of "dividend yield play"... ?
 
Commodity prices will fall?

Goodyear dismisses analysts predictions

Date : 27/08/2006

Reporter: Alan Kohler

ALAN KOHLER: In announcing his record $US10 billion result this week - which is $AU13.7 billion - BHP Billiton boss Chip Goodyear noted that a result with so many zeros was a little difficult to comprehend. What he might find even harder to comprehend was the immediate reaction of apathy from investors who started heading for the exits pretty much as soon as his blockbuster came out. I spoke to Chip Goodyear who, while now working on a bigger sequel next year, faces the potential dramas of soaring costs, volatile prices and risky exploration.

Chip Goodyear, BHP Billiton's share price is actually selling at a discount to the rest of the market despite everything that's gone on - the $10 billion profit - partly because the analysts are forecasting a decline in commodity prices next year. So what do you think of that consensus view, that commodity prices are going to fall and that BHP Billiton's profit will fall?

CHIP GOODYEAR, CEO BHP: Well listen, we can't predict commodity prices. I mean, the market - that's set by supply and demand in the marketplace. I think the interesting thing to note though, as you said, the market is expecting them to fall. Now we don't know what's going to happen and there doesn't seem to be much expectation that it might not fall.

ALAN KOHLER: But you used the work 'draconian', I think, the other day in relation to that. Is that another way of saying they're wrong?

CHIP GOODYEAR: 'Bear market multiples' was the word that I used, but it is, if you take a look at how we trade relative to the market, as you said, it does look like Chicken Little - 'The sky is falling!' - and that's been something that's been around that it's not going to last, it's going to fall off the cliff and it hasn't. So the question is simply build in some probability that in fact things may be better than the commodity prices falling off the cliff.

ALAN KOHLER: And you don't think they'll fall off a cliff?

CHIP GOODYEAR: Well, I think that from where we are in certain commodities you're going to see some moderation, you should. I mean, copper price at $3.50, nickel essentially $30,000 a tonne - you don't need those kind of prices to make nice returns but if you use those prices, boy, we are at extremely low multiples and nobody's even using that. So you may get some moderation in price but, on the other hand, people have been expecting that for some time.

ALAN KOHLER: In fact, some of the supply/demand equation is in your hands. Has BHP and the industry actually learnt from the last time this happened where there was oversupply in the 90s that drove the price down? Have you learnt lessons now that you're applying?

CHIP GOODYEAR: Well, I think the key lesson for us and for I think most people in the industry, certainly the significant players, is economics is what ought to drive decision making. It's not just about volumes, it's not just about pounds and ounces and barrels - is it a good value decision? Markets come into balance. You don't have a perpetual deficit or a perpetual oversupply, so we have an important task of making sure we are adding production to meet the demand that we see around the world and it continues to grow very rapidly, so from time to time you'll have a little bit of oversupply but that's not a negative. That will make our customers feel comfortable about the surety of supply and give us a reasonable price.

ALAN KOHLER: In fact, there's quite a lot of shortage at the moment. What's going on in the nickel market at the moment?

CHIP GOODYEAR: Well, as you say, there's simply no inventories in the nickel market and demand for stainless steel continues to rise so with some of the shortfalls in production this year, we estimate about 23,000 tonnes of nickel are not being produced this year that we expected at the beginning of the year, that's for the industry as a whole. So we're in a position where there's just no nickel and the demand is still there. In that market, you can't predict the price because that company that needs the nickel is going to pay what it takes. That's not a comfortable position for either the suppliers or, obviously, the consumers.

ALAN KOHLER: A lot of the focus in the market this week was on the buyback and still is, I guess, and there was some disappointment about it. Is that just, sort of, the whingeing of investors who are never satisfied, or do they have a point?

CHIP GOODYEAR: Well, I'd say a couple of things. First of all, the short-term market activity is driven much more by hedge funds and speculators and traders. There's a lot of money that follows that investment philosophy and they're the ones who are going to move the price around in the short-term and they'll be talking their positions or their book. We can make the stock move in one day by making certain announcements, but that's not our driver. Our driver is long-term value creation and we've done a great job of that. So we're going to continue to do the things that make sense in the long-term, not try to get a one-day bounce in the stock price.

ALAN KOHLER: You said Friday you would possibly speed the buyback up, given the opportunity. What do you mean by 'opportunity' - if the price falls more?

CHIP GOODYEAR: That's it. If the market decides that they're not interested in resources this week - just facetiously this week at some point- and they go off to some other area, that's a great opportunity for us. If you look back over the last few years, about every six months, the market panics for some reason. We have good visibility to our customers, we have good visibility to our production, that's a good opportunity for our long-term shareholders and we need to take advantage of that.

ALAN KOHLER: The Escondida strike has been quite protracted. Do you think you're going to be faced with more and more of this sort of thing in developing countries, where workers there see all the money you're making and decide that they want a share of the action?

CHIP GOODYEAR: Well, particularly in this commodity environment, all of our constituencies are looking at the price of the commodity and are reaching the conclusion they would like to participate and, in fact, they did. We find that our tax payments are going up significantly, royalty payments are going up significantly, our wage bills certainly go up, both in the underlying wage as well as bonuses. We have to share the performance of the organisation to those that are important to make our business work. That's critical for us. But we do have to make sure we do it in a way that is flexible, that benefits when prices are good and when they're not good, we have to have a sustainable business and so building in fixed-cost structures is a real challenge for us.

ALAN KOHLER: In general, BHP Billiton is more or less six big companies - I mean, it's the size of that. And I just wonder, the management challenge of that - you effectively have to get six people who are capable of being CEOs of six big companies and persuade them to be direct reports to you. Is that a key challenge for you, as the CEO?

CHIP GOODYEAR: Absolutely. Management is always a challenge, particularly in environments like this. People think it's easy because prices are high. In fact, all the constituencies that are groups that make our business work we have to deal with and it's probably more than six because we have our business leaders around the world and many of them operate businesses that on a stand-alone basis would be the largest in their industries. So what do we try to do? We try to set our charter, our guide to business conduct and certain objectives every year that I work with our business leaders on and then within those issues of guide to business conduct and charter they can execute their business plan. So I'm not telling them what labour contract they should have, what tyre contract they should have. I don't worry about the grade. They run their businesses and then we, obviously, from time to time, month to month, quarter to quarter, we talk about how they are performing against their objectives. So they have a lot of freedom but they do have to live within the BHP Billiton standards of how we do business.

ALAN KOHLER: Is there any limit to the size that system can manage?

CHIP GOODYEAR: Well, listen, I've had a question about size at least for the last five years. When we were a $28 billion company in 2001, people said, "How big can you get? "Are you too big to grow?" And here we are, $120 billion and we've somehow been able to do it. So I think we can continue to use that system and if good opportunities are out there, we will continue to grow and expand.

ALAN KOHLER: And will you continue to make acquisitions?

CHIP GOODYEAR: If they make sense and we've done, obviously, WMC. We had a couple of what we call bolt-on or smaller acquisitions. We will, if there's something that fits with our portfolio, fits well with us, we can be the best owner, we will certainly be competitive. Obviously as prices rise, that becomes a bigger and bigger challenge. Size is not our objective. Business performance, long-term values of performance and if there's an acquisition that can make that work, fine. If not, we've got a lot of organic opportunities, about $14 billion or $15 billion in our portfolio to execute - we are happy to do that.

ALAN KOHLER: We'll have to leave it there. Thanks very much, Chip Goodyear.

CHIP GOODYEAR: Thank you, Alan.
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http://www.abc.net.au/insidebusiness/content/2006/s1725127.htm
http://www.abc.net.au/reslib/200608/r103145_316229.asx
 
Realist said:
True.

Man I love renting, my dryer sh*t itself this week, phoned the landlord and a new dryer was delivered today.

Do not dis renting, it rocks! :D
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Which means your rent will go up an extra 5-10 a week now to cover the cost of a new dryer.

I asked for Aircon in my unit that I was renting, I got it, but up went the rent just after it was installed.

Nothing comes for free :2twocents
 
2020hindsight said:
:confused: Could it be that BHP would not have fallen so much if they had made a lesser profit(?) :millhouse
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SImple answer is no, cause its all about future EPS

copper and nickel, which make up alot of BHp sales, , are very highly priceed now, one could say pretty much unstainable, so profit are likely to fall next yr or the following

thx

MS
 
Stop_the_clock said:
Which means your rent will go up an extra 5-10 a week now to cover the cost of a new dryer.

I asked for Aircon in my unit that I was renting, I got it, but up went the rent just after it was installed.

Nothing comes for free :2twocents
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Well my rent has not gone up for 3 years so far.

And I flatted in Cremorne for 5 years, the rent never went up once.

I always pay the rent on time, chat to the owner tell him how I got the carperts professionally cleaned recently, tell him he can come over whenever etc. We have old blinds and old carpet, if I move out he'll have to buy new stuff - the agent has already recommended that. We have a busted light, a few other minor issues that I do not care about, I mention them but say there is no need to fix and I never moan about them, but he knows are there. I even offer to fix stuff myself. He's happy with me at the current rent, and I am happy too.

I am value renting!!!

A fundamentally good solid flat that others may overlook but is in a great area, we have a pool, garage with automatic door, it is underpriced and a good long term hold.

And man am I saving not owning.

:D
 
TraderPro said:
I like the way you think :)

I bet you depreciate everything and anything you're eligible too and you have a lease on a car etc...

Perhaps you can leverage up your 19 using CFDs or warrants? Maybe exchange your BHP shares to instalment warrants and use that widely promoted (by the asx) strategy of "dividend yield play"... ?
Click to expand...


I was kidding about the 19. :rolleyes:

You can't even buy only 19 if u wanted to.

I have well over $10,000 in BHP.
 
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