The BHP Group Ltd (ASX: BHP) share price has slumped 22.32% lower in 2020, but is it in the buy zone?
Why the BHP share price has slumped lower in 2020
As is the case with most ASX 200 shares right now, the coronavirus pandemic has triggered the BHP share price collapse. Government restrictions have put pressure on supply chains and operational capabilities.
On top of that, the mining sector has another concern. Reduced international trade and mass economic shutdowns have raised questions about the demand side of the equation. Add in heated diplomatic relations between Australia and our largest trade partner, China, and the BHP share price has a big question mark over it.
Is BHP a bargain buy or set to fall further?
A 22% decline in 5 months is worth paying attention to. However, it’s not all doom and gloom for investors right now. China’s economic activity looks to be picking back up after the initial pandemic shock. That’s good news for BHP’s earnings if trade does indeed increase.
On top of that, the Australian Government has flagged infrastructure as a potential economic booster. That means more steel needed for major roads, railways and other projects. As a dominant iron ore supplier, that puts BHP in a good position with higher iron ore prices and demand for its products.
The real question here is the unknown. If we knew the economy would pick back up again quickly, I think the BHP share price would be undervalued at its current price of $30.41. Unfortunately, that’s not the case, so there is some guesswork involved.
I wouldn’t consider BHP to be good defensive buy right now. If you want portfolio protection, a non-cyclical dividend share like Coles Group Ltd (ASX: COL) might be a better bet.
However, if you’re willing to take some risk, I think you could get some big rewards from the BHP share price in 2020 and beyond.
Our experts here at The Motley Fool Australia have just released a fantastic report, detailing 5 dirt cheap shares that you can buy in 2020.
One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…
Another is a diversified conglomerate trading over 40% off it's high, all while offering a fully franked dividend yield over 3%...
Plus 3 more cheap bets that could position you to profit over the next 12 months!
See for yourself now. Simply click here or the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.
Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET. 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.