BHP Billiton Limited (ASX: BHP) has been a serial underperformer for investors in recent years due to tumbling commodity prices, diminishing global demand and poor capital management decisions. These factors have seen the miner's shares drop a massive 24% since early 2011, which compares to a 12% rise for the S&P/ASX 200 Index (INDEXASX: XJO) in the same time.
Despite this poor track record the stock could now be shaping up as a reasonable buy. Its shares are priced at $38.08 and are trading on a price-earnings multiple of 13.8. Here are three good reasons to buy the stock today…
1) With a focus on improving productivity, BHP Billiton managed to smash production forecasts in the 2014 fiscal year. Iron ore volumes increased to 225 million tonnes (compared to a forecast 217 million tonnes), while record volumes were also recorded for copper, metallurgical coal and petroleum.
2) The miner is also heavily focused on reducing costs, which have heavily impacted overall earnings in recent years. As production volumes continue to increase, costs should continue to improve which will help BHP Billiton cope with falling commodity prices.
3) Rio Tinto Limited (ASX: RIO) delivered a very impressive earnings report last week, which indicates BHP's own earnings report could also be very strong when it reports on Tuesday 19 August.
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BHP Billiton Limited presents as a solid blue chip stock to buy today, particularly given its juicy, fully franked dividend yield. However, given its sheer size, investors should by no means expect the stock to double in price anytime soon…
