BHP Results Don’t Matter – This Does
BHP results are out today. I think the share price is up 1%.
They had a profit number which, if you strip out impairments from last year, was down something like 26%. Smallest dividend in eight years. And yet they come out with the headline profit number up 14%. They had a lower iron ore price and a lower coal price.
Can’t do anything about that. And a higher copper price. They can’t do anything about that.
It drives home something that, if you haven’t picked this up from 27 years of Marcus Today, you haven’t been reading. The BHP share price is all about commodity prices tomorrow – not the results last week, last month, or in this case, last year.
The results are pretty irrelevant, really, because the share price is highly correlated with commodity prices, particularly the iron ore price. The share price will be dictated by what the iron ore price does next, not by what happened last year.
And if the results are worse or better than expected, it’s not a reflection of BHP’s fortunes. It’s a reflection of the inaccuracy of the research, because all that is known and past.
So you see BHP up 1% today – you don’t ask whether the results are good or bad. If you want to get BHP right, you’ve just got to ask: what are the iron ore price, coal price, and copper price going to do in the future?
That’ll dictate whether buying or selling BHP is worth doing now.
The results today – the basic message is this: research on resources companies is almost pointless, because unless you can get the future of commodity prices right, you’re not going to get the share price right.
So yeah, interesting. We’ve seen the results, we knew what the commodity prices did last year, but it’s not really the point.
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