This fund manager thinks the BHP share price could reach $100!

This expert has outlined why China could spark strong gains for BHP.

| More on:
A cool young man walking in a laneway holding a takeaway coffee in one hand and his phone in the other reacts with surprise as he reads the latest news on his mobile phone

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The BHP share price has dropped over the last few months
  • This pessimism could be a great buying opportunity for resource businesses, according to one fund manager
  • A recovery of the Chinese economy may drive the commodity sector higher

The BHP Group Ltd (ASX: BHP) share price has drifted lower over the last few months, trading at $43.88 at the time of writing. But a fund manager has suggested the ASX mining share could rise as high as $100 in the future. Let's have a look at what might cause such a monumental increase.

The fund manager who's made the call is Tribeca Investment Partners' Ben Cleary, according to reporting in the Australian Financial Review.

Cleary has suggested it's a great time to invest in ASX mining shares despite pessimistic sentiment.

Why be bullish on miners?

The fund manager suggested there are supply constraints with a number of commodities after a "decade of underinvestment in new projects, while demand is continuing to build amid the transition to a decarbonised world".

Cleary points out that ASX mining shares are achieving good profits, enabling them to pay good dividends and fund share buybacks.

Despite the sound operating conditions, the fund manager thinks valuations in the resources sector have dropped because of the fears of a potential global recession, which might hurt demand for raw materials.

Why could this be good news for the BHP share price? The AFR reported Cleary thinks the market prices an event "long before it takes place", so he believes the market will soon be looking beyond the current economic uncertainty.

BHP share price to hit $100?

As we can see on the chart above, BHP shares are sitting at around $44, so the share price would need to more than double to hit $100 a share. But Cleary thinks the BHP share price can rise to $100 over the longer term in the current commodity cycle. He commented in the AFR:

Resources stocks are trading cheap, particularly against the broader market and there's all these categories of potential catalysts like M&A that could spark a rally.  

We just think it's a great time to be adding exposure to the sector, and we have been, despite the uncertain environment we're in. I think people will look back and think they should've been topping up their exposure to resources stocks during the last couple of months.

BHP has a diversified resource base across iron ore, copper, nickel, and coal. China is a major buyer of iron ore, so what happens with the Asian superpower could be essential to the future success of the BHP share price. So what does the fund manager think about the outlook for the country?

Clearly noted that there has been some "underwhelming" economic data from China but he suggests its economy is strengthening. Cleary has visited the country three times so far this year. He points to a number of positives including rising property prices in most cities. As well, sales volumes are almost back to pre-COVID levels and home builders are also reportedly issuing bonds to foreign investors again, according to Cleary.

The fund manager said:

Activity in China is as strong as I've ever seen it – there's no doubt domestic travel is as strong as it's even been in the last 20 years, and commuting numbers are as strong as we've seen.

He thinks that strong credit growth will continue in China, which is good news for the manufacturing sector and subsequently iron ore. His bullish call on the BHP share price is a "proxy" for how bullish he is for the resources sector.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Resources Shares

a sad looking engineer or miner wearing a high visibility jacket and a hard hat stands alone with his head bowed and hand to his forehead as he speaks on a mobile telephone out front of what appears to be an on site work shed.
Resources Shares

Down 14% in 2024, why is the BHP share price sliding again today?

ASX 200 investors are bidding down the BHP share price on Wednesday.

Read more »

A mining employee in a white hard hat cheers with fists pumped as the Hot Chili share price rises higher today
Resources Shares

These ASX 200 mining stocks could rise 40% to 50%

Analysts think these miners are dirt cheap at current levels.

Read more »

Image from either construction, mining or the oil industry of a friendly worker.
Resources Shares

Fortescue share price leaps 5% as electric machinery makes a milestone

Fortescue is charging ahead with its electric mining ambitions.

Read more »

rising mining asx share price represented by happy woman miner in hard hat
Resources Shares

Why the BHP share price crushed the benchmark this week

BHP shareholders enjoyed a rewarding week.

Read more »

A man wearing a hard hat and high visibility vest looks out over a vast plain where heavy mining equipment can be seen in the background.
Dividend Investing

Here is the profit forecast to 2026 for BHP shares

Let’s unearth how much profit this miner could make.

Read more »

Female miner standing next to a haul truck in a large mining operation.
Resources Shares

Is the worst of the selling now over for ASX iron ore shares?

ASX iron ore giants like BHP, Rio Tinto and Fortescue rebounded this week after falling hard in 2024.

Read more »

Three satisfied miners with their arms crossed looking at the camera proudly
Resources Shares

Why are ASX 200 mining shares smashing the benchmark on Wednesday?

Rio Tinto, BHP and Fortescue shares are all charging higher today.

Read more »

Two miners standing together.
Resources Shares

Why is the South32 share price getting battered today?

ASX 200 investors are bidding down South32 shares today.

Read more »