BHP Billiton Dumped

By Dale Gillham

BHP Billiton, the largest listed company on the Australian share market, has weathered all manner of financial storms, including the GFC, and this week the company announced it has boosted profits by a further 10 per cent. Given this, you would think that shareholders would be happy but this was not the case.

Why Was BHP Billiton Dumped This Week?

Some shareholders dumped the stock. Why is this? BHP Billiton announced plans to spin off a number of assets so as to create a new listed entity on the Australian share market and some shareholders didn’t warm to the news as it was expected that BHP Billiton would announce plans for a share buyback, whereby BHP Billiton would hand over available cash for some of your shares.

A Buyback for BHP Billiton?

The reason some shareholders like these buybacks is because they increase the value of shares still listed by reducing supply and increasing earnings per share for remaining stock. Shareholders who participate in the buyback receive a premium for their shares and sometimes this is a way for shareholders to gain a tax advantage depending on how the company structures the buyback.

image of BHP head office

BHP Billiton is the largest listed company on the Australian share market

No Buyback for BHP Billiton Shareholders…

The news that there will not be a buyback angered shareholders looking for a higher return than has been achieved in the share price over recent years. Note that BHP’s share price is still down in excess of 20% from the high in 2011. However, I believe any decision BHP Billiton makes needs to be in the interests of all shareholders and more about medium to longer term goals rather than short term interests of a few. The BHP Billiton board ought to stand firm on their decision not to offer the buyback now, with a view to review this decision once the demerger is done.

So What Do We Expect In The Australian Share Market?

This week the Australia share market has continued to achieve further gains, with the All Ordinaries index climbing by around 2.0 per cent to a high of 5672 points during Thursday’s trade. Although the market did give up some of these gains at the end of the day, the overall rise broke above the previous peak in July at 5633 points, which is a significant milestone, and a very solid signal that a further rise is likely to follow over the coming months. This week is week two of reporting season for the Australian share market and quite a number of companies have already reported at or above analyst forecasts and positive sentiment from this has lifted prices. Companies which showed solid moves prior to reporting season are now likely to settle down for a short while before the next move up.

all ordinaries index Australian share market image 25-08-14


To your profitable trading,

Dale Gillham Chief Analyst Wealth Within

Dale Gillham, ‘one of the country’s most respected analysts’ (Wealth Creator Magazine, Nov/Dec 2004), sought after key note speaker and author of the best selling book ‘How to Beat the Managed Funds by 20%’. Dale has assisted thousands of traders and investors to learn to trade shares and become confident and profitable in their direct share investments. Tired of an industry saturated by quick fix gimmicks and expensive short-courses, Dale co-founded Wealth Within to provide ‘ real education and ongoing personalised support’, as well as independent investment adviceto traders and investors who have become disillusioned by the market for one reason or another. As testament to this, Wealth Within launched Australia’s first and only nationally accredited Diploma of Share Trading and Investment.