Shares in BHP Billiton Limited (ASX: BHP) have so far failed to live up to the hype this year. While a number of analysts had pegged the stock as one of the 'stocks to own for 2014', it has thus far dropped more than 4% to trade at $36.42, while the broader S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) has edged forward nearly 2%.
Although it has failed to perform this year, there are plenty of reasons to like the stock going forward! Here are three reasons why BHP Billiton would make for a good buy today.
- BHP Billiton does not share the same level of reliance on any one commodity as any other mining stock. For instance, Rio Tinto Limited (ASX: RIO), Fortescue Metals Group Limited (ASX: FMG) and BC Iron Limited (ASX: FMG) all rely heavily on iron ore to generate their revenues whereas BHP relies on iron ore, copper, coal and petroleum. This high level of diversification makes it far less susceptible to the price volatility of commodities.
- While the drop in iron ore price is one of the primary reasons behind BHP's disappointing start to the year, it could actually be a positive for the miner in the long term. In the near-term it will impact the miner's margins and earnings, but it could also force higher-cost producers (and smaller rivals in China) out of the market, leaving BHP with a greater market share.
- Australia's largest miner also has fantastic exposure to coal and potash. Although neither are too bullish currently, demand for the resources are tipped to soar over coming decades as the world's population continues to skyrocket. BHP is arguably the best positioned miner to benefit from both trends.
Investors who are confident the iron ore price will drop further in the second half of 2014 may want to hold off from buying just yet, because a further tumble in price would likely have an effect on BHP Billiton's shares in value too. However, the long term is still looking bright for the miner, and that's what investors should really be focused on.
There's just ONE DAY left!