LONDON -- One of Warren Buffett's famous investing sayings is "be fearful when others are greedy and greedy only when others are fearful" -- or, in other words, sell when others are buying and buy when they're selling.
But we might expect Foolish investors to know that, and looking at what Fools have been buying recently might well provide us with some ideas for good investments.
So, in this series of articles, we're going to look at what customers of The Motley Fool ShareDealing Service have been buying in the past week or so, and what might have made them decide to do so.
Best in class
BHP Billiton (LSE: BLT ) hasn't exactly been a stellar performer so far this year. Even after its recent slip, the FTSE 100 is still up nearly 6% in 2013, whereas BHP's share price has slumped close to 18%. But, so long as the fundamentals are sound (or are being made so), that sort of drop could suggest that there's value to be had in the global mining giant, which might be why it's at number 10 in our latest "Top Ten Buys" list*.
On at least one measure, BHP seems a good buy -- its on a current P/E of around nine, which is well below the FTSE mining sector average. That could indicate that BHP is better value than its sector peers, so long, of course, as it can maintain (or, ideally, increase) its earnings.
One thing in BHP's favor in that respect is its diversity. It's not just a mining company (although it is a very substantial one) ‑- it also a produces a considerable amount gas and oil. So when earnings from its mining operations fall -- as they will from time to time, because of the cyclical nature of the industry -- it has those from gas and oil to help smooth things out.
BHP also pays a respectable dividend, currently forecast to be over 4% for 2013, which beats the FTSE 100 average. Better still, the company has a good record of maintaining, and even increasing, its dividend, even when times are tough -- despite falls in earnings in 2009 and 2012, BHP raised its dividend in both years. Given that analysts are forecasting a hefty decline in BHP's earnings this year, that sort of commitment to its dividend is reassuring. One this year's drop in earnings is behind it, analysts expect a sharp rebound, which could help push the dividend up further.
Over recent months, the company has been undergoing a root-and-branch restructuring and transformation program, including divesting non-core assets, aimed at reducing costs and increasing efficiencies. And the top management of BHP recently underwent some significant changes. Out went CEO Marius Kloppers, who reigned over some substantial increases in costs and expenditure, and in came Andrew Mackenzie, previously head of BHP's non-ferrous metals division. Out also went a whole layer of management, which, the company said "brings the operations closer to the CEO and ensures alignment between strategic and managerial leadership", and in came some new blood to the company's 'Group Management Committee' (its senior leadership).
Management changes can often have an unsettling effect on a company -- even when they're ultimately for the best. But with its avowed focus on being "best in class in terms of dollars spent per tonne mined and barrel lifted, "maintaining [its] capital discipline" and "delivering sustainable returns" for shareholders, people buying BHP last week obviously have confidence in the new leadership of the company.
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* based on aggregate data from The Motley Fool ShareDealing Service.