BHP - BHP Group

[Julia]

BHP is starting to scare some of the "longer term" holders as it's price retraces closer to intrinsic values.

The question now is, will it overshoot on the downside, as much as it overshot on the upside.



jog on
duc

Hey Duc,

It has been some time since you graced us with your charm and erudition.

You may care to offer your archetypal fundamentalist views on the more general global situation - and the remedial measures offered so far - on one of the general threads?

With kindest regards
Julia

 

[ducati916]

Your pathetic analysis is available earlier in this thread for those interested.
Your contention is that you buy on high pes.
I will add more BHP on very low pes.
I am content to wait for markets to melt down significantly more.

I won't get into a debate with you about "intrinsic value" as we will never agree.
However, for those interested in BHP as an equity it is instructive to examine the price performance of BHP vis a vis other mining companies and other companies as a whole during this destructive market phase.

rederob,

Well it seemingly may well trade down towards my "intrinsic value." Go figure.

jog on
duc

 

[ducati916]

Ducati,
If BHP is $8 or even $10 in my lifetime I will run around the block naked cause I won't have pants let alone a shirt on my back

Just as the commodity bubble has burst it will over deflate and resulting correction should not only reflect real world demand/consumption but add much needed long term certainty for our material export industry.

Energy consumption and construction has slowed not stopped and world wide population growth and hence demand will ensure it never doses.

I'm buying BHP through RIO on every down day.

nick2

Commodities have been cyclical, and probably will remain cyclical. Thus, BHP will again see a bull cycle and return/exceed possibly it's highs.

The problem is purely psychological, who wants to buy when all are selling? Thus a valuation provides at least an "approximation" of what you should seek as remuneration for accepting the "risk."

jog on
duc

 

[ducati916]

Hey Duc,

It has been some time since you graced us with your charm and erudition.

You may care to offer your archetypal fundamentalist views on the more general global situation - and the remedial measures offered so far - on one of the general threads?

With kindest regards
Julia

Julia,

I may at that. However I'm sure many will disagree with your "analysis."

jog on
duc



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[treefrog]

Ducati,
If BHP is $8 or even $10 in my lifetime I will run around the block naked cause I won't have pants let alone a shirt on my back

shouldn't be too long Nick; not at the rate it's currently trying to get back there - ($8-10 jul03). besides if you are older than 5yrs, you probably need to do the run because it has already been there. - can always do it at night.

 

[Julia]

However I'm sure many will disagree with your "analysis."

Just as many will appreciate that my 'analysis' was at least partly tongue in cheek.

I know you are much too sophisticated to be offended and I should add that I have always enjoyed reading your posts. The stoushes between Tech/A and yourself were a delight.

 

[ducati916]

Just as many will appreciate that my 'analysis' was at least partly tongue in cheek.

I know you are much too sophisticated to be offended and I should add that I have always enjoyed reading your posts. The stoushes between Tech/A and yourself were a delight.

Julia,

Oh I'm sure the odd tete-a-tete will once again emerge with all the usual suspects, would be passing strange should it not.

jog on
duc

 

[rederob]

Well it seemingly may well trade down towards my "intrinsic value." Go figure.

jog on
duc

In the present economic climate its price may collapse considerably.
This has very little to do with intrinsic or fair value estimates.
It has a lot to do with a market meltdown and a rush for the exits.

Anyone claiming expertise in fundamental analysis would realise the asset base of BHP has grown considerably since 2005. Moreover BHP has had sharebuybacks in place for much of that time (until the RIO bid), thereby enhancing the per-share value of the company.

Irrespective of "value" considerations, BHP remains the high volume low cost producer of minerals plus oil, which will place it at a massive advantage during this downturn, and give it an incredible head start when the next commodity bull run resumes, as surely it will.

You need to focus on what BHP will represent from an investment perspective rather than slimily trot out an old post that becomes as accurate as a broken watch.

 

[treefrog]

Anyone claiming expertise in fundamental analysis would realise the asset base of BHP has grown considerably since 2005.
Irrespective of "value" considerations, BHP remains the high volume low cost producer of minerals plus oil, which will place it at a massive advantage during this downturn, and give it an incredible head start when the next commodity bull run resumes, as surely it will.

fair and relevant comment red, but as someone who used (in engineering aspects) terotechnology to determine assets and their real worth, a lot of so called assets are in fact liabilities - depending on just where the variables have shifted and which ones have shifted.
Haven't heard/seen anyone suggesting the market won't recover but it may not recover and mirror what it was.
I suspect BHP is big and smart enough to adjust but you never know for sure.

 

[nick2fish]

Hey Treefrog
Have you stopped driving cars in Broken Hill ? Building slowed to zero?

Bhp have apart from diversification, another long term plan to survive this downturn and be superbly positioned for the next commodity bull run ... its called acquisition.

And the reason it will pay off big time....SYNERGIES

The mirror was optimism and Greed which has as much chance of disappearing as future world demand.

 

[nick2fish]

shouldn't be too long Nick; not at the rate it's currently trying to get back there - ($8-10 jul03). besides if you are older than 5yrs, you probably need to do the run because it has already been there. - can always do it at night.

Oh it will be at night alright for the sake of of my neigbours who probably wouldn't recover from the cardaic arrest they would surely suffer watching my Man Boobs hit my chin

 

[treefrog]

Hey Treefrog
Have you stopped driving cars in Broken Hill ? Building slowed to zero?

Bhp have apart from diversification, another long term plan to survive this downturn and be superbly positioned for the next commodity bull run ... its called acquisition.

And the reason it will pay off big time....SYNERGIES

The mirror was optimism and Greed which has as much chance of disappearing as future world demand.

always a sign of bad times for the stock when holders ramp it desperately.
yes to both questions nick, BH a great leading indicator for BHP - they started here remember?
tell me how you get enough optimism from this BHP chart to "advise" getting in now??
If you track back to the last significant market dip 1987/8 what was the SP for BHP in those circumstances - $3.50? and allowing CPI of 100% to today that would make BHP down to $7 then when this dip bottoms and back up from there with those synergies, aquisitions and diversifications.
but looking at this chart and at the same time holding a current BHP stock certificate can only mean

 

[nick2fish]

Thanks for the warning though I'll be averaging down... on the way down.

Chart is grim but so was the market one week ago and all that of fear drove the quails from the bushes. Fear and margin calls.

I am not overly sensitive just making you guys work to support your opinions which benefits me as a holder/purchaser and others.

Cheers

 

[ducati916]

In the present economic climate its price may collapse considerably.
This has very little to do with intrinsic or fair value estimates.
It has a lot to do with a market meltdown and a rush for the exits.

Anyone claiming expertise in fundamental analysis would realise the asset base of BHP has grown considerably since 2005. Moreover BHP has had sharebuybacks in place for much of that time (until the RIO bid), thereby enhancing the per-share value of the company.

Irrespective of "value" considerations, BHP remains the high volume low cost producer of minerals plus oil, which will place it at a massive advantage during this downturn, and give it an incredible head start when the next commodity bull run resumes, as surely it will.

You need to focus on what BHP will represent from an investment perspective rather than slimily trot out an old post that becomes as accurate as a broken watch.

rederob,

Intrinsic values and undervaluations only become available in bear markets, or if very bad news assails a specific stock or industry. Therefore in a market meltdown, intrinsic value gives you an entry point, irrespective of what the market may, or may not do. That is exactly the point.

With regards to "resource common stocks" the increase in asset base can actually work as a negative. Here's a hypothetical example, although it was exactly this "problem" that the Banks sought to cure via their SIV's etc.

BV = Net Tangible Assets

So lets take company A and Company B

Company A has NTA of $100
Company B has NTA of $100

Company A earns 6% on NTA
Company B earns 12% on NTA

The market applies a multiplier of 10 times to the 6% earnings and 15 times to the 12% earnings, thus…

Company A = 6% * 10 = $60/share
Company B = 12% * 15 = $180/share

Now lets reduce Company A NTA to $50
The same earnings on 50% of NTA now returns 12% on NTA and gains the same 15 times multiplier, thus…

Company A = 12% * 15 = $180/share

Lo and behold, instant gratification, courtesy of a smaller “Book Value.”

This is exactly what the Banks were doing when they moved their “ASSETS” Off Balance Sheet, they increased their Return on Assets ratio, and benefitted from “upgrades” “outperform” and other associated nonsense on the basis of reduced Book Values.

BHP I agree is the low cost producer. Ironically, it is very often the "high cost" producers that run first in an upturn after a serious and prolonged downturn for their commodity. I'll leave you to see if you can figure out why this is the case.

As to your last comment, nonsense.

jog on
duc

 

[rederob]

rederob,
Intrinsic values and undervaluations only become available in bear markets, or if very bad news assails a specific stock or industry. Therefore in a market meltdown, intrinsic value gives you an entry point, irrespective of what the market may, or may not do. That is exactly the point.
jog on
duc

Bear markets provide entry points at lower prices, no more no less.
The markets come with no guarantees.

 

[skyQuake]

Bear markets provide entry points at lower prices.

That's no guarantee that these entries at lower prices will lead to exit at higher prices. People that bought dot com companies in the tech wreck looking for value got burnt pretty hard...

 

[jonojpsg]

That's no guarantee that these entries at lower prices will lead to exit at higher prices. People that bought dot com companies in the tech wreck looking for value got burnt pretty hard...

Absolutely no point in comparing dotcom trash with the biggest mining company in the world Agreed that lower entry doesn't necessarily lead to higher exit, but seriously you can't think that BHP will never get above $25 again?

 

[Mr_T]

BHP currently has a payout ratio of 25% (very low).

Conservatively speaking, this year's profit will increase by 70% (Commsec median forecasts claim about 100%, but lets be conservative).

It is unlikely that the payout ratio would go much lower.

Which means that theoretically, the dividend should increase by at least 70%. Or else have a ridiculously low payout ratio?

 

[treefrog]

Last Down Last Up

Snakes and Ladders:
A cautionary note to BHP permabulls. Historically, commodities are usually the last sector to join a bear market and last to rejoin the recovery.
True to form so far with XDJ (bellweather sector) leading the plunge with XFJ landing on a snake at the same time: the XMJ avoided the snakes and looked like winning the game until .........ar crap; landed on a big one.
XDJ blue
XMJ red
XFJ black

 

[treefrog]

BHP currently has a payout ratio of 25% (very low).

Conservatively speaking, this year's profit will increase by 70% (Commsec median forecasts claim about 100%, but lets be conservative).

It is unlikely that the payout ratio would go much lower.

Which means that theoretically, the dividend should increase by at least 70%. Or else have a ridiculously low payout ratio?

wonder how they will get the extra cash for RIO (not the execs holiday bash but the takeover) - surely they wouldn't reduce the divvy???

and forget not that the current market price reflects what the expectations are for that stock looking 2-3 years ahead

a $1:30 divvy may eventuate but if there is significantly reduced growth prospects that may mean a 4-5% divvy will be needed to hold the price as a reasonable earnings stock. So does that forecast only that BHP will be $25 this time next year if the divvy forecasts hold - all pure speculation of course