BHP Billiton Limited (ADR) (NYSE:BHP)
The mining company BHP Billiton was downgraded to Neutral on Thursday after Citigroup noted a number of challenges that the company and its new CEO will face over the next year. The firm believes that all positive catalysts such as cost cuts are priced into the stock.
Furthermore, the firm notes a slower rate of growth in China and reverting prices could have a negative impact on the stock. Currently, the company is seeing a decline in sales and is expected to see earning losses over the next year.
While the company does return a 3% dividend in 2013, I also believe there are too many questions and that there are much better selections in the market.
In my book, Taking Charge With Value Investing (McGraw-Hill), I examine human behavior and the psychological effects that take place in the minds of investors when a stock shoots higher or falls drastically lower (think roulette at a casino). For many investors, chasing these trends is common, even addicting, and very few are capable of realizing their losses because of their occasional gain. Investors need to avoid this behavior, and not look at the performance and then the news, but rather assess the valuation of a stock and then take into consideration the opinions of the analyst. By doing so, you will be able to find the inconsistencies and a distinction between performance and fundamentals, which creates value and allows for large returns.
The article Four Noteworthy Analyst Calls originally appeared on Fool.com and is written by Brian Nichols.
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