BHP Billiton Ltd Drops on Bond Purchase Plan

BHP Billiton Ltd [ASX:BHP] had a tremendous climb in 2016, finishing 40.31% higher for the year. But the stock is struggling to climb in 2017. BHP is more or less flat in the year-to-date.

This morning, BHP dropped 1.1%, to a recent low of $25.22.

Why did the BHP share price drop?

BHP said it will increase the amount it spends on bonds. Under their ‘Maximum Tender Offers’, BHP will buy back debt, costing the company US$893 million. In addition, BHP will also spend US$1.085 million buying back debt in the ‘Any and All Offer’.

What now for BHP Billiton?

BHP doesn’t look like a great investment opportunity on today’s drop. If you recently bought into BHP, this decline isn’t likely to change your mind one way or the other. Over the short term, there is little to gain by investing in a company like BHP. Though the stock rallied hard in 2016, it’s unlikely that a similar ascent will take place in 2017.

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Regards,

Härje Ronngard,

Junior Analyst, Money Morning

PS: We likely won’t see another turnaround in resources like we did in 2016. And if we do, it could be a while. Unless commodity prices suddenly move higher, earnings will likely stagnate.

That’s why some investors prefer the smaller end of the market.

Smaller miners are a riskier investment, there’s no running away from it. But they could potentially grow earnings 10-fold in a short space of time. Resource specialist Jason Stevenson is no stranger to explosive resource stocks.

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