The BHP Group Ltd (ASX: BHP) share price has been one of the stronger performers within the S&P/ASX 200 Index (ASX: XJO) over the last two months.
Since 20 October 2022, BHP shares have gone up by around 20%, while the ASX 200 has only risen by 6%.
But, a share price can only rise sustainably so much. It usually has to be backed up by some sort of business progression – a project getting closer to being finished, a new contract, profit growth, or something similar.
One expert believes BHP has gone up too much.
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Sell rating on BHP shares
Tony Langford from Seneca wrote on The Bull that the BHP share price looks "expensive" after rising to $46 on 15 December 2022, up from $37.36 on 31 October 2022.
He pointed out that BHP has recently lobbed a revised takeover offer for OZ Minerals Limited (ASX: OZL) at $28.25 per share.
His conclusion about BHP shares was:
Investors may want to consider trimming their exposure to cushion any potential correction in the iron ore price.
Is the OZ Minerals offer a big deal?
Just over a month ago, BHP announced it had bumped up the offer for the copper miner.
The resources giant said the offer represents the "best and final price" that the company is willing to offer, in the absence of a competing proposal.
This offer of $28.25 represents an enterprise value of $9.6 billion for OZ Minerals. This offer was 13% higher than the first BHP offer and 49.3% higher than the OZ Minerals closing share price of $18.92 on 5 August 2022, which was before the first BHP offer.
BHP is currently working on due diligence so that it can negotiate a binding offer.
BHP chair Ken MacKenzie said:
BHP's proposal would provide value to BHP shareholders by increasing exposure to future facing commodities, attractive synergies and adding to our pipeline of growth options.
BHP CEO Mike Henry added:
BHP's proposal represents a highly compelling offer for OZL shareholders, providing certainty at a time of macroeconomic uncertainty and market volatility, and increasing risks for the industry.
The combination of BHP and OZL's assets, skills and technical expertise provides a unique opportunity not available under separate ownership, with complementary resources including the Oak Dam exploration prospect and existing facilities within close proximity, backed by BHP's strong balance sheet, capital discipline and commitment to sustainable development.
Foolish takeaway
The performance of the BHP share price from here, in the short-term, could be largely dependent on which direction the iron ore price goes. Time will tell if Tony Langford from Seneca is right to be cautious on the resources giant right now.
