"Will things get better for BHP? Is there a future to look forward to healthy capital gains and dividends? My best performing stock this year is Google, up by over 60% since start of the year. Now those are some returns. Can BHP step up? Would love to hear some more positive views."
Having been a long-time follower of BHP (since the 1990s - they were still making steel back then), I wish I could offer you a more positive view but I can't.
For starters, it is a commodity producer. Meaning its a price-taker. Sometimes that price is high and sometimes its low (all outside of management's control).
Second, its a highly capital intensive business.
Third, its asset base - being of a geological nature - has finite life.
These aren't attributes of long-term shareholder wealth creation.
Little wonder then, that the stock has under-performed the broader market across just about all time frames:
While the board and management of a business such as this have no control over the price that is received for the company's products, where they are able to have an impact is the stewardship of shareholder capital, i.e., how they spend the surplus capital which gets generated by the company's operations.
And on the measure of allocation of capital, BHP's board culture has no demonstrated competence.
There has been a long history of BHP directors and management destroying tens of billons of dollars of shareholder wealth by chasing the "hot thematic" that prevailed at various points in time.
I'm not convinced anything has changed in that regard.
Maybe things have changed and the board has somehow found religion, but it is a long-taught lesson that "This time it's different" is a poor predictor of favourable investment outcomes.
Because much precedence tells us that - especially for big, lumbering, behemoth enterprises with no ingrained entrepreneurial culture - the future seldom ends up being all that different to the past.
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BHP Price at posting:
$37.72 Sentiment: None Disclosure: Not Held
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