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Is the BHP Billiton Limited share price a buy?

The BHP Billiton Limited (ASX: BHP) share price will be one to watch today after it fell by 4.58% on the London Stock Exchange over night. BHP revealed a set of disappointing numbers yesterday.

There were some positives like revenue growth of 16%, ‘underlying’ earnings before interest, tax, depreciation and amortisation (EBITDA) rising by 14% and underlying attributable profit increasing by 25%.

However, the bottom line was that reported profit after tax fell by 37%, mostly due to the US tax reform charges and the Samarco incident.

BHP has a proud history and is one of the world’s biggest resource companies, but it worries me that it two of its four segments are perhaps in a long-term decline. Petroleum and coal are likely to see declining demand over the coming years as different power sources are used.

I am surprised that BHP hasn’t moved into the lithium space because there seems to be growing demand for it.

BHP’s profit is extremely dependent on commodity price movements going in its favour. Sadly, it has no control over the price of its products. If a competitor starts selling iron or petroleum at a lower price, then it will have to match that price or risk making no revenue at all.

The 38% increase to the dividend was a nice touch, but that’s the only positive shareholders can take from the report I think.

Foolish takeaway

If I had to buy a blue chip resource company then I’d probably pick BHP. However, BHP is such a cyclical business that there are ‘right’ and ‘wrong’ times to buy it. I think the time to buy BHP shares was when it was trading under $17.50, not above $30.

I think it’s much better to buy businesses that can grow through any economic cycle, like this top stock.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. 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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