It is a toss up among 2 of the 3 major mining conglomerates - I could of picked Vale (RIO) just the same. Rio Tinto (RTP) is the 3rd name in this group but it's going through some transitions of late (large debt load, offset by infusion by Chinese capital)
- Aluminum Corp. of China said it will invest $19.5 billion in Rio Tinto Group, easing the Anglo-Australian miner's heavy debt burden while securing Chinese access to long-coveted mining resources. The deal, announced Thursday, is China's biggest overseas investment so far and highlights the country's growing financial clout even as it grapples with the world's worst economic downturn in decades.
Chinalco, as the state-owned aluminum producer is also known, pledged $12.3 billion for stakes in joint ventures in aluminum, copper and ore mining with Rio Tinto -- the world's third biggest miner.
Just another step to China's dominance - while we are squandering our cash away and giving away the farm a little bit more month after month, those with cash in the end will win. In my (very) long term thesis regarding the importance of natural resources in an increasingly overpopulated world - this is yet another step for China leveraging their cash horde to better position themselves. Meanwhile we've been busy buying overpriced junk with levered homes.
Anyhow, I digress...BHP Billiton (BHP) is an Australian based company with the broadest portfolio of metals among the three "majors" but again it's not so much the company but a proxy on the group. I still favor agriculture in the commodity spectrum, but HAL9000 trades them all in 1 group so I am not sure if it matters that much where you go. That said, I am still not a fan of oil or natural gas so I'm sticking with subsectors I either like (agriculture) or can live with (base metals).
Ironically BHP made a bid for RTP in late 2007 that RTP fought off during the height of the commodity bubble... oh how quickly things change. The Chinese were not happy about the deal due to the potential concentration of power the merger would of created [Nov 13, 2007: Chinese Worried About BHP Billiton/Rio Tinto Deal]
Interesting article from Forbes detailing some of the behind the
scenes moves China is doing to try to block this
potential mega merger in the mining industry between BHP Billiton (BHP and Rio Tinto (RTP).
The state-owned China Development Bank was reported on Monday by Britain’s Daily Telegraph to have started building up a stake in Rio Tinto (RTP ) aimed at blocking any deal.
....this should have serious world regulatory issues as combining the #1 and #3 mining companies in the world should cause some concerns - together they would control 1/3rd of the world's iron ore according to CBSMarketwatch.
Ah, how quickly the world changes. China wins.
BHP after gapping up just over a week ago (Baltic Dry Index baby!) took off from $38 to near $48. But this is not a buy and hold market - nothing lasts long and if you don't take profits the market erases them. It fell back to $39 this morning (erasing 95% of the gain), which "filled the gap" in the chart - so I bought just over $40. Just a starter stake at 0.8% of the portfolio. This purchase is right at the 50 day moving average so it's a low risk place to enter from that perspective as well. If it starts bouncing (i.e. $41+) I'll probably throw on another layer and then act like a pundit telling you that Baltic Dry Index clearly shows global growth is imminent. ;)
EDIT 11:00 AM - I increased my stake to 1.6% buying more near $41
We will return to a similar strategy we had in 2007 through summer 2008 in commodities; build a mini basket of names - although I will have far fewer names this time around. Last year I would of bought some BHP, some RIO, some Cleveland Cliffs, some Southern Peru Copper etc ;)
p.s. Bought a little Potash (POT) on the fall back to $81 as well
Long BHP Billiton, Potash in fund; no personal position
3 comments:
the BHP chart always looks like its been hit by a shotgun blast - holes everywhere
dang near every day starts with a gap up or down
never understood why...not like its lightly traded.....
Could be currency fluctuations, or randomness due to it's multiple listings. Its main listings are in London and Australia. Check out its charts on those exchanges:
http://www.google.com/finance?q=asx%3Abhp
http://www.google.com/finance?q=lon%3Ablt
Also gaps tend to be an occupational hazard on the Australian market. It's not unusual for stocks to gap up or down depending what the major markets have done "overnight" and then drift around in a much smaller range during the Australian day. This makes holding anything overnight like buying a lottery ticket, but also reduces the potential from day trading.
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