It’s gone from bad to worse for BHP Billiton Limited (ASX: BHP) shareholders.

After a disastrous 2015, spoiled by crashing commodity prices and the Samarco disaster, it was hoped 2016 would bring greener pastures.

But not so…

The shares crashed again on Wednesday, losing 3.5%, and fell even further at the market’s opening bell this morning.

BHP’s shares have now lost more than 20% in 2016 and are trading at their lowest price in more than a decade.

Now, some investors might be thinking things can only get better for BHP Billiton from here. After all, the shares are trading at their lowest price in 11 years – surely a rebound isn’t far off!

Digging Deeper

In light of BHP’s latest fall, Motley Fool Hidden Gems analyst Claude Walker posed an interesting query.

I’ll paraphrase a little, but he asked “If you didn’t know BHP’s past share prices, what would you think now?”

The question refers to a cognitive bias in investing known as “price anchoring“. It’s where investors use irrelevant information, such as past share prices, as a means of evaluating something.

To put it into context, BHP’s shares traded for around $45 in 2008, and again in 2011.

They’ve fallen sharply since then. But along the way, the big miner has attracted some big names endorsing its shares as a standout buy…

At $30, they were cheap…

They were even better at $25, and turned into a no brainer for some at $20.

They’ve since plunged past $15, and hit a low of $14.06 this morning.

Anyone who bought in at those “cheap” prices have been left standing with their pants around their ankles. However, based on their historical share prices, you’d be forgiven for thinking the shares couldn’t possibly fall any lower.

But ignoring those past prices for a moment, and instead focusing on the outlook for the mining sector, would you still buy shares of BHP Billiton today?

The Elephant in the Room

For BHP, 2016 has been much the same as it was in 2015.

Oil prices have continued to plummet. They fell more than 5% again overnight and are trading around US$27 a barrel, their lowest levels in 12 years.

The immediate future isn’t looking too bright either, with some pundits suggesting a drop to US$10 would be extreme, but plausible.

Iron ore isn’t faring much better. It’s sitting around US$42 a tonne, but most analysts believe it’ll trade in the US$30s range again before too long.

Then of course, there’s China…

The country that has for so long acted as the engine room behind the global economy is now growing at its slowest rate in 25 years.

It’s quickly transitioning away from an economy driven by infrastructure growth to one driven by consumption and services.

Less infrastructure growth means less demand for steel and coal. Slower economic growth usually also means less demand for copper.

When combined with oil, those are BHP’s most important commodities, and the ones that make up the vast majority of its earnings.

With oil prices where they are, it’s no wonder why BHP booked a US$7.2 billion impairment on its energy assets earlier in the week.

It later told investors to expect another US$300 million to US$450 million in write-downs, which relate mostly to redundancies and terminations, inventory write-downs as well as “global royalty and taxation matters”.

All things considered, things aren’t looking too great for BHP Billiton, nor its shareholders, and there is every chance its shares could fall even further.

Consider this Tweet from The Sydney Morning Herald’s Peter Ker just yesterday:

TS 21 Jan 16

Source: Twitter

That’s right, according to Barclays, BHP shares are worth just $14.70. And that’s based on the upside case!

Barclay’s estimates suggest that if commodity prices do continue to fall, and if conditions do continue to deteriorate, BHP’s shares could crash to around $6.30 – another 56% drop from their current price.

It really puts that current $14.21 share price into perspective… Although it’s trading well below its historical highs, doesn’t mean it won’t fall any further.

So, if not BHP Billiton..

Where should investors turn to?

It’s tough out there, for sure.

Investors around the world are experiencing extreme volatility right now, and there’s been few corners in the market providing any shelter.

They certainly haven’t found it in the normal places – the blue chips – which have traditionally been considered something of a safe haven.

The major banks, for instance, have fallen sharply from their 2015 highs, and fell even further yesterday.

Australia and New Zealand Banking Group (ASX: ANZ) was hit particularly hard, crashing 4.4% after analysts at Morgan Stanley said the bank will cut its dividend this year.

Its shares have fallen almost 16% so far in 2016 while they’re trading 37% below their March 2015 peak. All four banks have had an impressive run over the last few years, but their time in the spotlight may just be coming to an end…

Then there’s Woolworths Limited (ASX: WOW), which spent much of 2015 in the doghouse with BHP Billiton.

It’s still stuck without a CEO to replace the outgoing Grant O’Brien, while the future of its supermarkets business also remains unclear.

However, it did decide to pull the pin on its failed Masters home improvement venture this week. Short-term traders reacted with joy, but whether it was the right move for long-term investors is still worthy of a debate.

Coping with a Crash

In a recent post, Motley Fool columnist Morgan Housel wrote:

“No one knows what they want. When things are going well, people say they want a bear market because it would be an opportunity. When it comes, they get nostalgic for the days when everything was going well. It’s helpful to acknowledge that our emotions are driven by factors we don’t anticipate when envisioning the future.”

In a different bout of market turbulence late last year, Motley Fool Dividend Investor advisor Andrew Page noted this about market crashes:

“We all view past crashes as opportunities, and future [and current] crashes as risks.

The point is, market crashes can seem scary at the time. Some shares will fall for logical reasons, like those blue chips mentioned previously, but others will simply be thrown out with the bathwater.

Therein lies your opportunity…

With the S&P/ASX 200 (ASX: XJO) sitting more than 19% below last year’s peak, there are plenty of high-quality businesses trading at very reasonable prices.

They may fall further in the short-term, but it’s likely that the long-term investors who act on the opportunity will be rewarded for their patience.

In my opinion, one of the best opportunities right now could be the small, relatively unknown tech stock that recently became the latest Motley Fool Dividend Investor “Buy” recommendation.

For the sake of full-disclosure, I’m already a happy shareholder of this promising growth business. But I am certainly considering increasing my stake again at these price levels, especially with the shares offering a tasty 3.5% fully franked dividend yield.

Who knows, maybe the shares will fall further in the short-term, but the long-term investors who act on the opportunity could be well rewarded for their patience.

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