BHP Billiton strikes gold

Early this year I made a big mistake. I did not buy enough BHP Billiton (BLT.)

Soon after buying into BLT at below 900p the share price jumped up 20% so I decided to wait for the price to come back down before buying any more. The problem is that the price never came back down and in July touched 1500p.

Anyone who thinks blue chip companies are boring investments would have had their perceptions challenged by the volatility of miners and banks this year. But that is another story.

On Wednesday BLT issued the kind of yearly report that investors live for.

Profit is up 30%, cash flow is up 50%, the dividend is up 30% and over 5% of outstanding share have been repurchased!

This is all mainly due to rising commodity prices which begs the question - will commodity prices remain elevated? BLT management think that the growth of the Indian and Chinese economy is strong enough to maintain these prices in the medium term.

BLT has ten major projects scheduled to come online this financial year so sale volumes should increase significantly. In conjunction with the ongoing share repurchase program EPS growth should be in the low double figures even if commodity prices are static.

Is BLT good value? Assuming BLT makes 130p this financial year it is on a forward PE of just over 10. That seems a nice price for a company of this quality. I am buying more anyway!