There are concerns that stocks such as BHP Billiton (NYSE: BHP) that serve as proxies for the Chinese economy could dip next month with Beijing allows for foreign trading on the Shanghai Exchange. This results from concern that investors will prefer to buy shares of Chinese companies directly rather than companies such as BHP Billiton. That is showing up in the share price of BHP Billiton which is down for the last week, month, and quarter (chart below).
With both the Dow Jones Industrial Average (NYSE: DIA) and the Standard & Poor’s 500 Index (NYSE: SPY) up for 2014, BHP Billiton is off by nearly 2 percent.
Investors should take advantage of this to establish a position that should result in long term gains. Overall, BHP Billiton is positioned well to profit from growth in Asia, especially China. That is why it has served as proxy for the Chinese market.
Increased trading in Chinese stocks will not reduce the appeal of BHP Billiton as a highly profitable company.
The profit margin for BHP Billiton is over 37 percent. That comes from business operations. It has nothing to do with the amount of money taking the stock price higher or lower. Eventually the market will recognize that and take the share price up again.
The return-on-equity and the return-on-assets are equally alluring.
For long term investors, the dividend yield pays for the wait or the market to rebalance. The average dividend yield for a member of the Standard & Poor’s 500 Index is just under 2 percent. The dividend yield for BHP Billiton is 3.65 percent. In addition, the company has a history of increasing the dividend amount. For long term income investors, that results in a raise just for not selling the stock.
BHP Billiton is proving to be an opportunity for long term investors with the share price falling due to reasons having nothing to do with the core business operations,