After Australia’s largest mining stocks led the S&P/ASX 200 (^AXJO) (ASX: XJO) to its largest 1-day gain in 17 months on Friday, they are again trading in the red, with BHP Billiton (ASX: BHP) amongst those to fall.
Over the last month, BHP – like many other mining companies – has struggled to string gains together over consecutive days. Despite the index having gained 20 points, BHP is trading 1% lower in early afternoon trading, reversing much of its progress made on Friday.
A combination of diminishing international demand and increasing supply of resources, as well as the Australian dollar remaining high, is causing much volatility within the sector, as investors remain unsure what the stock’s next move will be.
As the market begins to accept the industry slow-down, BHP, like Rio Tinto (ASX: RIO), is working towards refreshing its balance sheet and ridding itself of assets that do not fit its core objectives. In turn, it is providing itself with a healthier cash pool and has announced intentions to reward loyal shareholders, as their focus turns to long-term sustainability.
Whilst the market remains volatile however, investors cannot be sure where the turning point will be for this company. Although it is currently trading roughly 35% below where it sat in 2011, it would still be wise to remain on the sidelines with this company and wait for a more attractive entry point. Instead, you could consider buying into other blue chip companies, which have beaten the market over the last 12 months.
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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.