As it nears its 52-week high, is the BHP share price a buy?

The BHP Group Ltd (ASX: BHP) share price has been on a tear in recent weeks, edging closer to its 52-week high.

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The BHP Group Ltd (ASX: BHP) share price has been on a tear in recent weeks, edging closer to its 52-week high of $39.91. At the time of writing, BHP's share price is trading 1.48% higher for the day at $39.80.

Recent gains in the BHP share price have been driven by increasing iron ore prices on the back of recent supply disruptions. But does that mean it's in the buy zone?

What's driven recent growth in the BHP share price?

Year to date, the BHP share price has grown by 14.13%. With the company's performance closely linked to China's economic strength and iron ore prices, events from late-March have given BHP shares a leg up.

As we all know, the Chinese economy is the world's top iron ore importer. This is because iron ore is a core ingredient in producing the steel that's needed for the construction industry.

So, when the construction industry is booming in countries like China, we can usually expect mining and resources companies like BHP to perform well. That's what we've seen so far in 2019.

It's also important to note that the BHP-owned Brumadinho dam collapse in Brazil earlier this year has constricted iron ore supply. This has driven iron prices higher which has spurred growth in the BHP share price too.

Should BHP be worried about China?

While the numbers might look attractive for BHP, especially with the growth in the company's share price over the last month, I don't think we can safely say it's smooth sailing ahead for the Chinese economy yet.

And given that the performance of a company like BHP is so closely linked to the strength of China's economy, it's important to understand how China's economy is really performing.

The media have widely reported that the latest US-China trade talks have been progressing well. That may be the case, but there are a lot of other factors influencing China's economy like its GDP annual growth rate.

China's GDP annual growth rate was 6.6% for 2018, the lowest rate in twenty-eight years. This is not exactly the news you want to be hearing out of an economy coming off its biggest construction boom in history.

Foolish takeaway

When I'm looking at companies, understanding the macro picture carries a lot of weight for me. After all, that's going to give you an indication of how your investment is going to perform, and it can help to keep your expectations in check.

Based on the mixed economic data out of China and the supply restrictions that have been driving iron ore prices higher, I'd stay on the sidelines with buying BHP shares until US-China trade talks conclude and the data out of China is clearer.

Are you looking for some other blue-chip shares to add to your portfolio in April? Here are three shares that have been rated a buy for April.

Motley Fool contributor Nicola Smith 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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