24th March 2014
Sentiment towards the commodity sector is beginning to warm-up with brokers tipping base metals group BHP Billiton as its shares hit a near two-year low writes Philip Scott.
The firm which also produces diamonds and aluminium as well as oil and natural gas has witnessed its shares slump by 8% over the past 12 months. Presently the shares are changing hands for circa 1,805p and analysts are calling the miner a ‘buy’ with Deutsche recently reiterating its own upbeat recommendation.
The Share Centre’s investment research analyst Helal Miah says: “Like many others in the sector, BHP has experienced falling sales and earnings as a result of falling commodity prices, despite production across many commodities reaching record levels. Large capital investment programmes during the boom in commodities in the run up to the financial crisis have led to increased capacity while demand has slumped.”
In contrast to many of its peers BHP Billiton, has managed to rise above the industry’s woes and has cheered investors by putting greater importance on shareholder payouts, with the group currently carrying an attractive forecast dividend yield of 4%.
The firm’s management has also acted conservatively in regards to investing in new capital intensive projects and have preferred to focus as much as possible out on its current range of productive assets.
Miah adds: “We recommend BHP Billiton as a ‘buy’ for investors as we believe in the longer term the company remains in a strong position to grow its profits as the global economy recovers. With the share price close to a two year low we would suggest investors seeking growth opportunities drip feed into the stock, as volatility remains within the sector.”