U.S. stocks are lower in early afternoon trading on Friday, with the Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) down 1.85% and 2.99%, respectively, at 12:20 p.m. EST. Those figures mean the U.S. stock market will likely add another losing week to the worst start to a year in decades. BHP Billiton Limited's shareholders are taking a bath today, with the New York-listed American Depositary Receipts down 8.21%.

The drop in BHP Billion's shares follow the miner's announcement that it expects to take a $4.9 billion post-tax ($7.2 billion, pre-tax) impairment charge on onshore U.S. oil and gas assets. The charge is the result of a bi-annual review of the company's assets in an environment in which the price of oil has continued to fall.

Oil has lost roughly a fifth of its value in 2016, with U.S. crude oil futures for delivery in February falling below $30 on Friday to a fresh 12-year low.

Four months ago to the day, on Sept. 15, upon learning that fund manager BlackRock had all but exited a 10.1% position in BHP Billiton, this column posited that "[w]e may not have reached the low in miners' stock prices, but they look cheap enough to begin buying, albeit selectively. BHP Billiton is a great candidate -- I'd rather take the other side of BlackRock's trade."

At that time, the shares were down nearly two-thirds (-64.6%) relative to their April 2011 high. This is what happened next (the blue line tracks BHP Billiton's performance):

BHP Chart

BHP data by YCharts.


In my defense, I didn't say the shares couldn't go lower (I'm the first one to say I have no idea how to pick a bottom). Nevertheless, if the old adage that there is no difference between being early and being wrong is true, then I was very early.

Can the shares continue to drop? Of course! One possible catalyst is a cut or suspension in the dividend, although with the London-listed shares yielding over 14%, the going assumption must be that the market has already discounted that eventuality (for the record, I think this is bound to occur).

However, none of this tells us much of anything about where the shares will be five or 10 years from now. And speaking of a longer time horizon...

In an another corner of the energy sector, billionaire investor Warren Buffett continues to add to Berkshire Hathaway's giant position in Phillips 66. He has now bought shares for seven days consecutively. As this column pointed out on Tuesday, you can currently get into the stock at a cost basis below Berkshire's.

The bloodletting in commodities markets is creating opportunity for patient capital, but those investors who will reap the greatest rewards will follow their North star: an assessment of business quality and intrinsic value. Furthermore, they must be willing to walk through the fire of volatility on the way to those rewards.