Is the BHP Group Ltd (ASX: BHP) share price a buy considering how volatile commodity prices are being due to the coronavirus pandemic?
It's this environment that shows why having a good product diversification strategy can really help in times like this.
The idea of oil prices going negative would have been crazy a few months ago. But here we are. It's a good thing that BHP can rely on iron, coal and copper.
Pleasingly, in the update yesterday BHP said that its financial position is strong. It's expected to generate "solid" cash flow underpinned by low-cost operations.
The iron ore price has held up well despite the coronavirus effects on China. The demand is still there, for now at least. That's why the BHP share price has held up fairly well. BHP said in its March 2020 update that it achieved record production at Western Australian Iron Ore (WAIO).
Despite everything that's going on, production guidance for petroleum, iron ore and metallurgical coal was unchanged. Copper guidance was broadly unchanged and energy coal production is under review with Correjon placed on temporary care and maintenance due to the coronavirus.
Is the BHP share price a buy?
As far as resource shares, it's hard to go too wrong with BHP. Each resource can provide diversified earnings if one of the others is weak, like oil is right now.
Iron ore continues to be a big earner for the company (and Australia as a whole).
I think BHP's ordinary dividend will be able to hold up quite well if the iron ore price continues to remain solid. But as investors we should be focused on total returns rather than just dividends.
The BHP share price is down 24% since the share market started falling. But I think the best time to buy resource shares is when their main resource is down heavily. Iron ore is still going well, so I'd wait on BHP and focus on non-commodity shares instead.
