Is BHP Billiton the Best China Play?
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Jonathan Yates
Is BHP Billiton the Best China Play?

BHP Billiton (NYSE: BHP), the massive Australian natural resources company, is pretty much a play on the economic growth of China.  For BHP Billiton to rise, China must grow….it is that plain and simple.

Due to disappointing economic growth in China, the stock performance of BHP Billiton has also been disappointing for its shareholders.  BHP Billiton is down for the last week, month, quarter, six months and year of market action.  For 2013, BHP Billiton is down by 16.96%.  The chart at the bottom of the page shows how BPH Billiton has lagged behind the Standard & Poors 500 Index (NYSE: SPY).

But, for long term investors, there is much to like about BHP Billiton.

While the average dividend yield for a member of the Standard & Poor’s 500 Index is around 2%, for BHP Billiton it is 3.56%.   That pays you to wait for the future, which has bullish projections.  Earnings per share growth for next year is expected to increase by 23.81%.   The profit margin is solid, too, at 14.47%. The return on equity of 15% is solid, too.  Now trading around $64 a share, there is a tiny short float of only 5% for BHP Billiton, so not many are betting that the price will fall much lower.

The most attractive aspect for BHP Billiton is that China continues to grow.  Economic growth for the most recent quarter came in at 7.7%.  Carl Weinberg, chief economist for High Frequency Economics, stated in a recent interview in Barron’s that he expects growth in China to be 10% again.  China still have more foreign reserves than any other company, over $3 trillion, and makes more in exports, with its people saving more.  There is much to be bullish about for China, which means there is much to be bullish about for BHP Billiton.


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