Goldman Sachs names BHP Billiton Limited and South32 Ltd shares as buys

Two of the best performing large cap shares on the market on Monday have been the BHP Billiton Limited (ASX: BHP) share price and the South32 Ltd (ASX: S32) share price.

At the time of writing, the shares of these two mining giants are up 2% and 4%, respectively.

While BHP Billiton has been given a lift from rising oil prices along with Oil Search Limited (ASX: OSH) and Woodside Petroleum Limited (ASX: WPL), there has also been another catalyst for BHP’s and South32’s move higher today.

Both of these miners were named as shares to buy by Goldman Sachs this morning. Here’s what its analysts have said:

BHP Billiton

According to the broker note, Goldman has upgraded BHP Billiton from neutral to a buy rating and increased the price target on its shares to $35.50 from $30.00. The broker feels that BHP is poised to outperform due to its belief that its cash conversion will improve in the second half. Goldman estimates that BHP will generate an extra US$1.7 billion in free cash flow in the second half compared to the first. Further to this, its analysts estimate that BHP’s shares are trading at a 9% discount to Rio Tinto Limited (ASX: RIO) versus a historic premium of 3%. Goldman expects this gap to close in the near future.


Another note out of Goldman reveals that its analysts have reiterated their buy rating and increased the price target on its shares to $4.10. Like BHP, Goldman expects South32 to generate high levels of free cash flow even based on its conservative commodity price forecasts. In addition to this, the broker notes the recent price increases of alumina and aluminium. These two commodities make up 50% of the company’s EBITDA and have rallied materially higher this month.

Should you invest in both miners?

While my preference remains BHP Billiton, I do think both shares are worthy of an investment right now. Especially if the world avoids a trade war and continues its strong economic growth.

This should ensure that demand for commodities remains strong and prices stay favourable for at least the next couple of years.

Finally, here are three more shares that I would rate as buys.

The Disruptors: 3 Revolutionary Aussie Companies to Back for 2018

We’re living in one of the most exciting times in investing history. Innovation and a booming culture of entrepreneurship are constantly creating new companies with the potential to make forward-thinking investors very rich. Now more than ever, one small, smart investment could make a huge difference to your wealth.

That’s why at The Motley Fool we’ve been scrutinizing the ASX to uncover the kinds of companies that we believe could turn into the next Cochlear or REA Group.

We’ve found three exciting companies that we believe re poised to perform in the new year. Click here to uncover these ideas!

Motley Fool contributor James Mickleboro 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.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…


The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!