Investment Column: Watch China before a punt on BHP Billiton

Our view: Cautious hold

Share price: 1555p (+27.5p)

For some time now, plenty of companies, both in the mining sector and elsewhere, have pinned their hopes on the emerging markets, specifically China and India.

Whacking great big GDP figures, and seemingly insatiable demand, meant until recently group's such as BHP Billiton could rely on some very big orders.

Then came the recession and with it the consequential drop in demand for commodities. As such, companies like BHP have suffered: The mining giant reported yesterday that full-year profits had dropped by half, its first profit decline in seven years.

Investors might be tempted to cut and run, especially in light of chief executive Marius Kloppers' musings that the last 12 months were the toughest he has seen. It will be hard to tell if real demand is increasing until next year, he adds. Those wanting quick returns should probably sell now, and take advantage of the 20 per cent rise the shares have seen in the last month. In the mining sector bets on the shadow boxing between Xstrata and Anglo American will probably be more profitable in the short term.

However, BHP is the benchmark for the industry, and while we would dismiss the argument that punters should always hold the biggest group, BHP has proven a steady punt in the past; longer term investors will note the $32bn that has been returned to shareholders since the BHP and Billiton merger eight years ago.

On the other hand, there is no getting away from the fact that yesterday's numbers were bad, even if expected. The analysts at Evolution say sell: "[The] numbers are on the better side of expectations but the outlook statement cautions about getting too carried away on the upside.

"This reflects concerns that medium-term commodity demand growth may be muted by structural economic problems and be offset by mine restarts ... BHP Billiton looks the most highly rated of the big four. Sell/Switch into a higher growth option." We would be prepared to wait until the full impact of the Chinese stimulus package has worked through before jettisoning the stock. Cautious hold.

Balfour Beatty

Our view: Buy

Share price: 346p (+26.4p)

You might need to read the following twice to believe it: the construction sector is in clover and its more impressive outfits are reporting stellar numbers.

After 12 months of misery for most in the industry, Balfour Beatty, said yesterday that it was going great guns, based largely on having its work spread across a number of different markets and countries.

In fairness to chief executive Ian Tyler, he has never said that the situation is dire, and likes to a draw a distinction between Balfour and the housebuilders, which have suffered the real woe.

Nonetheless, despite exposure to more defensive markets, such as education, health and road building, Balfour's share price has suffered with the rest of them, falling by more than 20 per cent in the last year. Mr Tyler concedes that some investors get put off by the group's complex nature, and that he "can't tell you" why the shares have traded down.

We reckon investors should put aside their confusion and buy the stock. The shares do trade on a discount to the rest of the sector, but with £12.5bn of secure orders on the way, we reckon the stock will head north. Buy.


Our view: Hold

Share price: 24p (-0.5p)

There is not a public relations firm under the sun that does not talk about the strength of a client's management team when asked about a company's attributes. We'd bet that Enron's cowboys got a glowing reference.

But a bet on Trifast, the maker and distributor of industrial fastenings, really is a bet on the ability of the management team to turn the group around after a pretty trying 18 months. The new team, led by chairman Malcolm Diamond, says it is streamlining the board and working harder to source supplies more cheaply, as well as improving the international sales force.

Investors may wish to wait and see how the new team does in terms of numbers. So far, the figures are bland; yesterday's market update said that trading in the first three months of the year was on a par with last year.

Mr Diamond says the new management is responsible for the share price rising from 8p in March (we do not doubt it, but would point out that most equities have risen in the same period), and that he is optimistic about the future. The shares, he says, are undervalued and will reach at least 51p.

We would wait for more tangible results before buying, but we do agree that the stock is cheap. Hold.

Start your day with The Independent, sign up for daily news emails
i100 In this video, the late actor Leonard Nimoy explains how he decided to use the gesture for his character
Arts and Entertainment
Secrets of JK Rowling's Harry Potter workings have been revealed in a new bibliography
arts + ents
Robert De Niro has walked off the set of Edge of Darkness
news The Godfather Part II actor has an estimated wealth of over $200m
Arts and Entertainment
Fearne Cotton is leaving Radio 1 after a decade
radio The popular DJ is leaving for 'family and new adventures'
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower