It is rare to find a company that is both caught in a maelstrom of global economic factors for which the future can present investors with a value buying opportunity or a serious risk and is considered a solid, large capitalization value play in uncertain economic times. BHP Billiton (BHP) is such a company, and, as such, warrants careful consideration by investors. As one of the world’s leading commodities companies, BHP Billiton is caught between downward pressure from a slowdown in China and continued strength in the commodities market, driven by general weakness in the global economy.
The China Factor
Any time a company has a significant connection to the Chinese economy, that connection is likely to have a significant impact on the stock’s performance. China has long enjoyed some of the most robust gross domestic product (GDP) growth of any country on the planet. Recently, however, China’s Premier announced a reduced expectation for Chinese growth, revising estimates down to 7.5% from a full 8%.
This reduction has two important messages that should be considered. First, it signals that the Chinese government is backing away somewhat from its policy of supporting explosive growth at all costs. Secondly, it has significant ramifications for global commodities prices. China may be the largest importer of commodities in the world, relying on foreign sources, including BHP Billiton for large supplies of building materials to fuel its growth. For example, China is thought to use roughly 40% of the world’s annual copper supply. To continue reading, click here.