A Guide To Buying BHP shares

Since going public on May 28th 1987, BHP’s stock value fluctuations have mirrored global economic trends and specific shifts within mining and commodity sectors.

At the start of this century, single-digit dollar figures were standard for BHP shares. During this period, worldwide commodity demand began escalating notably from emerging economies like China. Such a surge set the stage for Australia’s mining boom, with a bullish market pushing shares to nearly $45 by 2008—right before the Global Financial Crisis (GFC) hit.

As with many other companies, the aftermath of the GFC and the tapering off of the mining boom in the early 2010s led to a decline in BHP’s share value. By 2016, the shares had dipped to a low of $15, reflecting the ebbing tide of the mining-centric Australian economy.

Subsequently, BHP began to rebuild its position in the market, reclaiming most of its lost ground in the latter half of the 2010s. As the global economy began to recover and the demand for commodities grew, the share price also rose. This ascent was not without its challenges, with the Covid-19 pandemic introducing a fresh period of volatility. However, the subsequent global commodity price boom provided the necessary tailwind for BHP’s growth.

By 2021, BHP shares had not only recovered but had surged past previous records, touching an all-time high of around $52. As of October 5, 2023, the share price is $43.72. This current value is backed by a market capitalisation of $221.61 billion, a P/E ratio of 11.04, and a dividend yield of 5.98%.

Deciding to invest in a company like BHP is about more than just looking at its share price’s ups and downs. It’s about understanding the intricacies of the company, its industry, and the broader economic landscape—alongside your own investment goals and aims. Whether you’re a first-time investor or a seasoned professional, here’s a guide on what to consider and where to start when investing in BHP shares.

Understand the Financial Metrics:

• P/E Ratio (Price-to-Earnings Ratio): This metric shows how much you pay for $1 of a company’s earnings. A lower P/E might suggest that the stock is undervalued, while a higher one might indicate overvaluation. As of October 5th, 2023, BHP’s P/E ratio is 11.04. For comparison, competitor Rio Tinto has a P/E ratio of 13.81.
• Dividend Yield: This shows how much a company pays out in dividends relative to its share price. A higher yield might be attractive for those looking for investment income. BHP’s dividend yield is currently at 5.98%, considered a decent return for investors.
• Market Capitalisation: This represents the total value of all a company’s shares of stock. BHP’s market cap of $221.61 billion indicates its size and stability in the market.

Stay Updated With The Economic Landscape

Global events, commodity prices, and economic trends can impact BHP’s performance. It’s essential to be aware of such dynamics, especially given BHP’s role in the mining and commodities sector.

Dive into Company Financials

Before investing, always review a company’s balance sheet, income statement, and cash flow statement. These can be found in BHP’s annual report or on their official website in the investor centre. Look for trends in revenue, profit margins, debts, and other financial indicators to gauge the company’s health and prospects.

Understand the Competition

BHP operates in a competitive landscape with other mining giants. Analyse competitors’ performance, strategies, and market shares to see where BHP stands and what challenges or opportunities might arise.

• Brokers: Traditional brokerage firms, often backed by years of industry experience, offer personalised advice and research tools, which might be a suitable choice for those looking for a helping hand to assist with their investing journey.
• Share Trading Platforms: These online platforms or apps allow you to buy and sell shares directly. They’re often user-friendly and cater to both novice and experienced investors. Fees, platform features, and user experience can vary, so choose one that aligns with your investment goals and strategies.

Consult a Financial Advisor

If navigating the complexities of investing seems overwhelming or if you value expert insights, consider seeking advice from a financial advisor. Their expertise can provide clarity and direction for your investment approach.

It’s essential to remember that basing decisions on just a few indicators may not provide a complete picture. Be sure to take a holistic approach to researching before making a decision.

1. Research BHP: Before diving in, ensure you understand BHP’s standing and prospects. Familiarise yourself with its financial metrics, recent performance, and the overall economic context.
2. Select a Trading Service: You’ll need a stockbroking service or an online trading platform to purchase shares. If you’re new to the stock market, look for platforms that offer intuitive interfaces and educational tools to ease your journey. Crucially, ensure the service you pick grants access to the Australian Stock Exchange (ASX).
3. Open an Account: Set up your trading account by providing the necessary personal information, verifying your identity, and linking a bank account for fund transfers.
4. Deposit Funds: Before purchasing, transfer sufficient funds from your bank to your trading account.
5. Search for BHP: On your platform of choice, locate BHP using its ticker symbol ‘BHP’ specific to the Australian Stock Exchange.
6. Place an Order: Decide the number of shares you wish to buy and input the quantity. Choose between:
   1. Market Order: This buys the shares instantly at the prevailing market rate.
   2. Limit Order: Here, you specify a price at which you’d like to buy. The system executes the order once the stock hits your set price.
7. Review and Confirm: Before completing the process, double-check your order details, ensuring they align with your intentions.
8. Monitor Your Investment: After the purchase, watch your BHP shares closely. Stay in the loop with company announcements, periodic financial statements, and other relevant data for future decision-making.

While this guide gives a basic outline for procuring shares, engaging with a financial advisor and/or conducting thorough research is always prudent to ensure that your investments align with your financial aspirations and risk-appetite.

Deciding whether to sell a stock is as significant as the initial buying decision. The answer isn’t always clear-cut and involves considering various factors. Here are some guiding principles to help you navigate this decision for your BHP shares:

Review Your Goals: Over time, financial situations, goals, and priorities can change. If you initially invested in BHP with a specific objective in mind, it’s worth revisiting that. Perhaps you’ve achieved your financial milestones, or your investment focus has evolved. Take a moment to reassess if your BHP shares still resonate with where you currently stand.

Dig into BHP’s Trends: Beyond just the current share price, delve into BHP’s recent performance metrics, strategic business decisions, and forward projections. It’s crucial to gauge whether the company is on an upward growth path or if it’s navigating new challenges that could influence its future.

Watch the Market: BHP operates within a dynamic global landscape, heavily influenced by broader industry trends, commodity prices, and economic indicators. These external factors can play a crucial role in BHP’s stock valuation. Staying informed about the mining and commodities sector and global demand and supply intricacies can offer insights into potential stock movements.

Mind the Tax: Every share sale has tax implications. In Australia, this often translates to capital gains or losses. The longer you’ve held a stock, the more tax advantages you might have. For instance, holding BHP shares for over a year could qualify you for a capital gains tax discount of up to 50%. Before making a move, it’s prudent to consult a tax expert to ensure you’re aware of potential obligations and benefits.

Stay Objective: Investing can be an emotional journey, especially with the inherent volatility of stock markets. However, decisions based on fleeting emotions can derail long-term strategies. Whether the market is soaring or facing a downturn, try to think long-term. Use thorough research, analysis, and foresight as your primary decision-making tools rather than reacting impulsively to short-term changes.

Selling your BHP shares is a straightforward process. Here’s a simple step-by-step guide:

1. Log Into Your Platform: Access the stockbroking service or online trading platform where you originally purchased your BHP shares.
2. Locate Your BHP Shares: Navigate to your portfolio and find the BHP shares you wish to sell.
3. Select ‘Sell’ Option: Click on the ‘Sell’ option, usually adjacent to your BHP share listing.
4. Specify Quantity: Indicate the number of shares you want to sell. You can opt to sell a portion or all of your holdings.
5. Choose Order Type: Decide between:
   1. Market Order: Instantly sell shares at the current market price.
   2. Limit Order: Set a specific price at which you wish to sell.
6. Review & Confirm: Double-check your specified details to ensure accuracy before finalising the sale.

After confirming, the platform will execute your selling order, and the proceeds, minus any fees or commissions, will be credited to your linked account. Remember to always keep a record of your transactions for tax purposes.