Diversified mining giant BHP Billiton Limited (ASX: BHP) has had a rough month with its shares having fallen a massive 13.4% since late August. In comparison, the benchmark S&P/ASX 200 (INDEXASX: XJO) has declined 3.8%.
A decision not to return additional capital to shareholders, the conditions of a proposed demerger and a tumbling iron ore price have all acted as a significant drag on the stock which traded as low as $34.42 today.
With the shares now sitting within just 0.7% of their 52-week low, there are probably some investors who are wondering whether now would be a good time to buy.
Buy, Sell, or Hold?
I've long held that BHP Billiton is one of the best mining stocks to hold. Although its potential to deliver smashing returns is limited due to its sheer size, its high level of diversification and low cost base make it the safest option. This is particularly the case right now given the strong headwinds facing the sector, including declining Chinese demand and plummeting iron ore prices.
Although BHP Billiton is well equipped to deal with these conditions, investors need to consider how its margins and overall earnings could be affected – particularly in the short-to-mid terms. While I expect iron ore prices to linger around current levels (or perhaps drop even further) for some time, I believe there could be more pain in store for shareholders in the coming months. As such, investors may be better off waiting on the sidelines for an even more attractive point of entry.
