Company

BHP Billiton (NYSE: BHP)

Operations

BHP is the world's largest miner, with products ranging from aluminum to zinc and worldwide distribution.

Recent Price

$73.76

Market Cap

$205 billion

Trailing P/E Ratio

16.2

Return on Equity TTM

28.8%

Source: Yahoo! Finance.

The business
Whether working on a piece for my Foolish friends, or in my earlier days as a Wall Street analyst, I have remained cognizant that it's a major no-no for analysts to fall in love with the companies they're examining.

Nevertheless, I must admit to at least a fascination with Australia-based BHP, the world's biggest minerals and metals producer that also sports substantial petroleum operations. At the same time, it hasn't hurt that BHP has kept us entertained with takeover efforts involving the likes of Rio Tinto (NYSE: RTP), its big, London-based mining colleague. More recently, it has been preening for Canada's PotashCorp (NYSE: POT) with a not-well-received offer of $38.6 billion.

BHP's current array of products includes base metals such as lead, silver, zinc, copper, gold, and molybdenum. Beyond that, it is a producer of primary aluminum, and its carbon steel materials include manganese alloy, iron ore, and metallurgical coal. It shares iron ore supremacy with Rio and Brazil's Vale (NYSE: VALE), with the trio controlling a slug of the world's supply, much of which ends up in Asian steel mills.

BHP's other products include energy coal, uranium, and petroleum. In fact, unbeknownst even to most in the energy industry, BHP's acquisition interests have spread far beyond Rio and PotashCorp. For years, it has discussed making a joint run at Australia's Woodside Petroleum with Royal Dutch Shell (NYSE: RDS-A). Further, it has apparently studied wounded BP's (NYSE: BP) Gulf of Mexico assets, along with eyeing BP's Macondo partner Anadarko Petroleum (NYSE: APC).

But lest you think BHP is on its way to becoming an oil company, some of its other product lines seem likely to reduce the importance of hydrocarbons to the company. For instance, a doubling of iron ore production, along with what I consider to be a major movement into potash, would reduce the overall value of oil and gas to the company.  

Why it's a core stock
BHP strength results primarily from the variety of its product base. Its iron ore business has grown to the point that it accounts for more of the company's earnings than any of the other products described above. And while trends come and go, there appears to be little likelihood that this product line will wane in importance in the near term. And while Rio Tinto has suffered bribery and espionage charges in China during the past year, BHP has remained unscathed, and is shipping 100% of its ore production.

In fact, much of the iron ore demand emanates from China's and India's huge appetite for steel, of which iron ore is one of the major ingredients. And as BHP CEO Marius Kloppers told a group in London not long ago, China, in particular, is making continuous use of steel in its efforts to develop new urban infrastructures, along with utilities and power systems.

And beyond that, improving demand in North America, Japan, and Europe could place a new floor under the world of commodities prices.

Risks
Perhaps it's the economist in me, but when I look carefully at BHP and its peers, the salient risk that I see involves the still-weak economies of the Western countries slipping into another recession -- or failing to emerge meaningfully from the one that we tripped into a couple of years ago. Unfortunately, a daily examination of The Wall Street Journal or a perusal of constantly emerging economic statistics can leave one with diametrically opposed levels of confidence each day.

Clearly, few seers expected the commodity roller coaster that struck us during the past couple of years. On that basis, we have little choice but stay vigilant and watch developments going forward.

As for BHP, however, my senses tell me that nearly a worldwide economic cataclysm would be required to derail the Melbourne company. And since I don't envision such an event occurring, I expect the large and diverse company to remain solid.

In sum
BHP's shares haven't shot the proverbial lights out recently, but neither have they been devastated by the economic events that have been so difficult to tolerate and even to understand of late. But the inkling that BHP's wide product base can -- and likely will -- continue to provide a special level of support for the company should now be expanding for Fools and perhaps less sagacious investors as well.

On that basis, and especially if the world's economy continues to improve, however slowly, I can't imagine a better holding than this solid company.  

Fool contributor David Lee Smith doesn't own shares in any of the stocks named. Try any of our Foolish newsletter services free for 30 days.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Motley Fool has a disclosure policy.