Why this analyst has upgraded BHP Billiton Limited to buy

Citigroup has kicked off the trading week with an upgrade for diversified natural resources company BHP Billiton Limited (ASX: BHP) pushing it up from a neutral rating to a buy.

Shares in BHP were down 0.5% to $28.48 at the time of writing with several other resource stocks dominating the early declines today including Fortescue Metals Group Limited (ASX: FMG) – down 2.2% to $4.22 – Orocobre Limited (ASX: ORE) – down 2.7% to $4.87 – and Pilbara Minerals Ltd (ASX: PLS) – down 1.8% to 79c per share.

Citi has upgraded BHP to buy with an increase on its price target for the stock from $32 to $33 off the back of momentum from the company’s shale assets – which are up for divestment and may catch a higher price than previously thought.

Citi’s calculations project BHP’s shale might attract US$14 billion instead of US$10 billion saying rumours of global upheaval due to rising risks from economic protectionism are “overdone”.

BHP’s share price has tracked upwards in the last 12-months, from $25.73 at this time last year recovering from a mid-2017 low of $22.10.

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Motley Fool contributor Carin Pickworth 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 Scott Phillips.

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