BHP shares are at a record high, should I buy or sell?

A record high can make a share feel expensive, but I would not be rushing to sell BHP shares today.

| More on:

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

BHP Group Ltd (ASX: BHP) shares have been on a huge run.

The mining giant hit a record high of $65.78 on Wednesday, which means the share price is now up approximately 75% over the past 12 months.

After a move like that, it is natural to ask whether the opportunity has passed. A record high can make a share feel expensive, especially when investors remember buying opportunities at much lower prices.

But I would not be rushing to sell BHP shares. In fact, I still think they are a buy for long-term investors.

A woman with a mobile phone in her hand looks sceptical with a puzzled expression on her face.

Image source: Getty Images

The valuation is not extreme

The first point I would make is that BHP does not look wildly expensive on current forecasts.

Using CommSec consensus estimates, the company is expected to generate earnings per share of around $4.46 in FY26 and $4.48 in FY27.

At the record high price of $65.78, that puts BHP on a price-to-earnings (P/E) ratio of about 14.7 times FY26 and FY27 earnings.

That is not a bargain-bin valuation, but I do not think it is excessive either, particularly if commodity prices remain stronger for longer.

The dividend also remains useful. CommSec estimates fully-franked dividends per share of $2.12 in FY26 and $2.02 in FY27. That implies forward dividend yields of around 3.2% and 3.1%, respectively.

A supportive commodity backdrop

The bigger reason I would remain positive is the potential commodity backdrop.

Bell Potter has argued that a new resources supercycle may be forming. The broker believes several megatrends are now colliding with a resource base that has been underinvested in for years, creating the potential for "new and higher price floors" across a range of commodities.

That is an important point for BHP. The last major resources boom was driven heavily by China's industrialisation and urbanisation. That created enormous demand for bulk commodities such as iron ore, coal, and oil.

The next cycle could look different.

Bell Potter points to AI capital expenditure, global electrification, and deglobalisation as major structural forces. Those trends are more intensive in materials such as copper, aluminium, uranium, lithium, nickel, and rare earths.

BHP is not exposed to all of those commodities equally, but it is very well placed in copper. I think that is a major reason to keep owning the stock.

Copper is central to electrification, power grids, data centres, renewable energy, and broader industrial demand. At the same time, supply is difficult to bring on quickly. Large copper projects can take many years, face permitting hurdles, and require substantial capital.

If demand keeps rising and supply remains constrained, higher prices could be more durable than the market expects.

Why I would still buy

BHP is still a cyclical business. Commodity prices can fall, China remains important, costs can rise, and investor sentiment toward miners can change quickly.

But I think the current setup is more compelling than a simple "share price has gone up, therefore sell" argument.

BHP has scale, world-class assets, strong cash generation, and exposure to commodities that could become even more valuable if the global economy keeps investing in electrification, AI infrastructure, and energy security.

The company may not rise another 75% over the next year. I would not invest on that assumption. But I think the long-term case remains strong, especially if Bell Potter is right that this is the early stage of a more structural commodity cycle.

Foolish Takeaway

I would not sell BHP shares just because they have reached a record high.

The share price has moved strongly, but the valuation still looks reasonable on consensus forecasts, the dividend yield remains respectable, and the company has exposure to commodities that could benefit from powerful long-term demand trends.

There will be volatility along the way. That comes with owning miners. But for investors with a long-term view, I think BHP remains one of the best ASX 200 resource shares to buy and hold.

Motley Fool contributor Grace Alvino 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 recommended BHP Group. 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

Lithium mine drilling machines.
Resources Shares

Buy, hold, sell: Liontown, Wildcat Resources, PLS Group shares

Let's check out some new ratings on 3 ASX lithium shares this week.

Read more »

Two cheerful miners shake hands.
Resources Shares

2 ASX mining stocks to sell after strong runs: expert

Far East Capital says investors should take their profits and run on these 2 ASX mining stocks.

Read more »

a mine worker holds his phone in one hand and a tablet in the other as he stands in front of heavy machinery at a mine site.
Resources Shares

Rio Tinto share price rallies 75% in 12 months: Is the mining stock still a buy or have the shares now peaked?

Find out what brokers tip for the Rio Tinto share price over the next 12 months.

Read more »

Miner and company person analysing results of a mining company.
Resources Shares

Up 38% in a year, ASX All Ords mining stock reports rare earths progress

The ASX mining stock is targeting rare earths on the United States critical minerals list.

Read more »

Young successful engineer, with blueprints, notepad, and digital tablet, observing the project implementation on construction site and in mine.
Resources Shares

These 2 ASX resources companies could deliver better than 60% returns, Macquarie says

Both of these companies are in the critical minerals space.

Read more »

Suncorp share price Businessman cheering and smiling on smartphone
Resources Shares

I bought 682 BHP shares in 2020. Here's how they've performed

The surprising payoff from buying BHP during uncertainty.

Read more »

Person with a handful of Australian dollar notes, symbolising dividends.
Resources Shares

Is the Fortescue share price a buy for its 8% dividend yield?

Fortescue could be a contender for significant dividend income from a blue-chip.

Read more »

Concept image of a businessman riding a bull on an upwards arrow.
Share Gainers

How these 3 ASX 200 mining stocks have more than tripled investors' money in a year

These large-cap ASX mining shares have rocketed 207% to 379% in a year. But how?

Read more »