Should you buy BHP Billiton Limited shares for 2016?

BHP Billiton Limited (ASX:BHP) shares have already fallen more than 4% since the beginning of 2016.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

For shareholders of BHP Billiton Limited (ASX: BHP), it hasn't been the start to 2016 they'd been hoping for.

Following a disastrous run in 2015, plagued by crashing commodity prices, a disaster at one of its mines in Brazil and speculation over the sustainability of its 'progressive dividend' policy, the shares plunged roughly 34%, heavily underperforming the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) in the process.

Unfortunately, they've continued to fall even further this week. They're down 2.7% today alone at $17.11 for a total loss of 4.2%, having fallen in each of the sessions so far in 2016.

While some investors and analysts expressed their confidence that the worst was surely over for BHP Billiton, conditions could continue to decline over the next 12 months. Indeed, oil prices are expected to continue falling – at least in the first half of the year as rising stockpiles combine with weak demand – while iron ore prices are also tipped to retreat following their recent recovery.

BHP Billiton's shares might still be hovering near their lowest price in a decade, but if conditions do continue to worsen, then they could be in line for further losses. Most analysts expect the miner to cut its dividend in the coming years – especially if it continues to prioritise the strength of its balance sheet over shareholder returns – while earnings could also come under further pressure.

While BHP Billiton's shares deserve a position on your watchlist, the headwinds facing the sector create an unnecessary risk for investors, in my opinion, particularly given that there are shares of plenty of other great companies also trading at very reasonable prices right now.

Motley Fool contributor Ryan Newman has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. You can follow Ryan on Twitter @ASXvalueinvest. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »