Putting a price on BHP

I was very interested in your article regarding BHP and Rio by InvestSMART’s Gaurav Sodhi (“Truck loads of cash”, September). He wrote that “we’re raising our BHP buy price” from $23 to $25 and sticking with ‘hold’ ”.

I am wondering if that was a “typo”. Obviously you would be aware that BHP hasn’t been $25 since July 2017 and I doubt it will see the mid-twenties in the near future – I certainly hope not or we are all in big trouble.

Anyway, your article was most informative and covered a different slant on the big two. Gerry

Gaurav replies: Hi, no typo, I’m afraid. Our buy price stays at $25.

A few points around this. We’re greedy and would only buy a cyclical business with a poor track record like this at a decent discount. Others may have a different tolerance for risk.

It was only two years ago that no one wanted to buy it at $14 and five years ago when everyone wanted to buy it at $50. Resource businesses move around a lot and the current share price should not be a guide to long-term value.

There is no reason one must chase the share price or, indeed, no reason why one must own BHP. It is one stock among many.

We want to have a portfolio of the best opportunities and that means not falling in love with stocks. We hold BHP in our portfolio but accumulated that holding below our buy price. We haven’t chased it higher.