South32 Ltd shares break a new all-time low! Should you sell now?

South32 Ltd (ASX:S32) plunge to their lowest level ever but selling your shares now could be a massive mistake.

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What happened? It's been an extraordinarily tough start for BHP Billiton Limited's (ASX: BHP) spinoff South32 Ltd (ASX: S32). The company's had to contend with record low commodities prices on a number of its products, a falling stock market, and the condemnation, and probably momentum, that comes with being a new listed entity that quickly loses money for investors.

The share price quickly jumped above $2.30 after listing at $2.13, implying a market capitalisation of $12.48 billion, but have just as quickly fallen back to earth- in fact on Wednesday the shares hit a new all-time low of $1.40 during the day, and closed at $1.41. Should we start to consider buying shares in the company yet?

Time to buy or sell?

Before we answer that, here's a recap of South32's asset locations and products:

  1. Worsely Alumina
  2. South Africa Alumina
  3. Mozal Aluminium
  4. Brazil Aluminium
  5. South Africa Energy Coal
  6. Illawarra Metallurgical Coal
  7. Australia Manganese
  8. South Africa Manganese
  9. Carra Matoso Nickel Mine
  10. Cannington Silver and Lead Mine

You might notice that many of these commodities remain in long-term bear markets at, or near, cyclical lows. This is a negative for near-term earnings, and of-course you need to be pretty special to pick the bottom of any bear market, but could be a positive for investors looking to hold for the long, long, long term (I'm thinking 7 to 15 years). For me, it's a gamble to buy today based on future value until we see a more meaningful turnaround in commodity prices, however selling could be a mistake; here's why.

Now What? I think South32 is rapidly becoming a tasty takeover target.

While investing in potential takeover targets is fraught with danger, investors might look at South32 with the view that the current share price represents long-term value for very large investors with very long time frames.

South32's assets are known for being low-cost and long-life, and could easily be incorporated into the operations of a diversified miner with operations in similar locations.

Motley Fool contributor Andrew Mudie has no position in any stocks mentioned. You can find Andrew on Twitter @andrewmudie Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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