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.
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One of the big changes in companies like BHP and RIO is that...
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$43.90 |
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Mkt cap ! $222.7B |
Open | High | Low | Value | Volume |
$43.28 | $44.06 | $43.25 | $361.0M | 8.220M |
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No. | Vol. | Price($) |
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2 | 508 | $43.89 |
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Price($) | Vol. | No. |
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2 | 43696 | 43.850 |
1 | 1740 | 43.840 |
2 | 38223 | 43.830 |
1 | 600 | 43.820 |
Price($) | Vol. | No. |
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43.900 | 5100 | 2 |
43.930 | 129 | 1 |
43.950 | 24000 | 1 |
43.970 | 800 | 1 |
43.990 | 1200 | 1 |
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