I’ve been looking for an opportunity to add to my BHP Billiton Limited (ADR) (NYSE:BHP) position since I first started to build it as we came out of the financial crisis. With shares down more than 22% this year, and 40% less than its all-time high set just over two years ago, I now have my long-awaited opportunity. I’m going to take advantage of it and add to this core holding of my portfolio.
I originally bought BHP Billiton Limited (ADR) (NYSE:BHP) because I wanted to have a mining company in my portfolio. Miners provide the world’s economy with the basic building blocks required to grow. Also, most mining stocks pay a solid dividend that’s wanted in a core holding. I settled on BHP Billiton Limited (ADR) (NYSE:BHP) because it has assets strategically located close to the fastest growing Asian markets, and it’s the most-diversified global resources company on the planet, which helps to mitigate some of the major risks investors face when investing in a miner.
While many investors choose to invest in a specific metal such as gold or coal, I like diversity when it comes to my base metals. Investors in a pure play iron ore miner like Cliffs Natural Resources Inc (NYSE:CLF) have seen the pain firsthand of what it’s like to be in the wrong metal. Likewise, investors in gold mining stocks such as Goldcorp Inc. (USA) (NYSE:GG) have endured a lot of pain as the price of gold plunged.
Cliffs Natural Resources Inc (NYSE:CLF) stock was just crushed when it reported first-quarter earnings this year. It was hit by lower commodity prices and higher costs, which forced the company to slash its dividend and raise capital to bolster its balance sheet. Meanwhile, Goldcorp Inc. (USA) (NYSE:GG) investors had to endure last quarter’s record 23% plunge in gold prices. BHP Billiton Limited (ADR) (NYSE:BHP), on the other had, has had the diversity that has helped the company’s stock to remain relatively flat over the past year while those two stocks cratered.
The other piece of BHP Billiton Limited (ADR) (NYSE:BHP)’s business model that I really appreciate is that its business is more diverse than just metals. The company has a growing oil and gas business, as well as a developing position in potash. Those two assets, in my opinion, set its business apart.
Oil and gas is a great business for BHP Billiton Limited (ADR) (NYSE:BHP). It has developed a significant position in the Gulf of Mexico, onshore U.S., and Australia, as well as emerging positions elsewhere. The company delivered record oil and gas volumes last year and was solidly profitable. The future looks very good, as it has a tremendous reserve base and among the lowest operating costs in the industry.