BHP $19 dollars aussie here we come..., page-148

One of the big changes in companies like BHP and RIO is that they have narrowed their earnings base considerably by going from truly multicommodity miners to focusing on only 4 or 5 minerals. Granted, even the "old" companies would be in strife right now as commodity prices are down across the board. However, by focussing on "four pillars" (+1 for BHP) any one event in one commodity now exaggerates the affect on the company as a whole.

BHP's S32 spinoff made some sense on a scale argument and how the businesses spun out added little to BHP's bottom line, but rather than reducing risk I believe they have increased it. Much like a share portfolio, there is strength in diversity. I know there were many other reasons for divestment (the cynic in me certainly recognises the need to get rid of future expensive legacy issues), but I wonder if market segmentation and the "beta" of the businesses were really thought through?

On another topic, BHP sunk to $18.22 during the GFC. It has since spun out S32 with a market cap of nearly $7,000B, or about 10% of BHP's mkt cap. Logically, any support level for BHP has dropped by 10%, or about $2/share. Unless the global outlook improves, I suspect there is still more weakness to come.