Should you buy BHP stock on a pullback?

Is the 'big Australian' a big opportunity?

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The BHP Group Ltd (ASX: BHP) stock price has suffered a 15% fall this year, as the chart below shows. Is it time to dig into the ASX mining share? I'll give my view on the business.

What's going on with the BHP share price?

I think three main dynamics are at play with the recent BHP share price movements – the takeover play for Anglo American, changing commodity prices and costly write-offs.

Before the FY24 first-half result, BHP reported it was going to recognise impairment charges amounting to US$6.6 billion (pre-tax) relating to its nickel mining in Australia and the Samarco disaster in Brazil.

According to Trading Economics, the key commodity iron ore has declined from US$140 per tonne at the start of the year to around US$117 per tonne.

BHP launched an audacious bid for Anglo American, with an all-share offer for the UK-listed miner. While that business owns good copper assets, with a quality iron ore segment, it also comes with several other assets that BHP doesn't want (eg, Anglo Platinum and Kumba), which complicates the deal.

Anglo American has already rejected the initial offer, so BHP would need to up the bid to gain interest.

Are there positives for the ASX mining share?

The BHP stock price is close to its 2024 low and 52-week low, yet conditions seem to be improving for the business.

The iron ore price has bounced upwards from around US$100 per tonne at the start of April 2024 to US$117 now – it's going in the right direction. That is boosting BHP's potential profitability, which is usually what investors focus on.

Copper prices are near a two-year high of around US$4.7 per pound, which is good for BHP. According to Trading Economics:

Official trade data from China showed that imports of copper ore jumped by 11.8% from the previous year to 2.35 million tonnes in April, indicating that the world's top producer of refined copper continued to take in large volumes of inputs despite the sharp increase in prices.

The figures were in line with the pickup in factory activity indicated by the country's PMIs during the period.

My 2 cents on the BHP stock price

The BHP share price is still almost 20% higher than its 2022 low, so it's not as cheap as it has been. But, with the increasing copper and iron ore prices, the company's profitability is more compelling.

The Samarco costs are large and necessary but are proposed to be payable over more than a decade.

I think the company's focus on decarbonisation commodities like potash and copper is a good move. Diversifying profit away from just selling iron ore to China is also good.

Because of the above issues, the dividend payments may be smaller in the short term, so I'd be in no rush to buy it for dividends.

I have a goal of trying to beat the market, so I don't think it's cheap enough yet to invest. However, if the BHP stock price did fall — say to below $40 — then that could be the right time to pounce.

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.

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