With shares of BHP Billiton Limited (ASX: BHP) once again trailing the gains made by the broader S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO), it must certainly be a test of shareholders' patience.
While analysts had identified BHP Billiton as 'the stock to buy in 2014', the stock's 1% drop compared to the market's 3% rise has certainly come as a disappointment. Despite the lacklustre performance however, there are still plenty of reasons to fancy the miner over the long run.
Here are five reasons you should hold onto your BHP shares:
- BHP Billiton maintains far more diversified operations than its competitors, making it a much safer bet. While BHP Billiton has dropped 1% since the beginning of 2014, Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG) have plummeted 10.7% and 19.9% respectively.
- The company is also ramping up its production levels of iron ore based on the belief that demand for the commodity will remain strong well into the future. Although the additional supply will add pressure to the iron ore price, it will also reduce the miner's breakeven price through economies of scale.
- While iron ore and coal prices are dropping, nickel prices are soaring. BHP doesn't consider nickel to be amongst its core operations, but the increasing prices will definitely help attract an attractive bid for its assets.
- The proceeds from these sales could well be put towards increasing shareholder returns. The miner has indicated that once its net debt falls below US$25 billion, it will turn its attention towards capital management initiatives, which many believe will include a massive share buyback program.
- Looking to the long-term, there is every reason to be excited about the miner's potential in the coal industry. Although there is currently significant pressure on its price, coal will remain an in-demand energy source for decades to come.
