I have been intrigued by BHP Billiton, the commodities producer with various interests in Australia, the United Kingdom, Chile, and South Africa. If you want to own an asset that produces oil, iron, nickel, copper, natural gas, diamonds, coal, and a wide assortment of minerals, you need look no further. It is walking, talking diversified commodities conglomerate.
It produces 68 million barrels of oil, 1.7 million tons of copper, and 635 bcf of natural gas each year. If John Neff of the old Vanguard Windsor Fund fame were managing this collection of assets, I would not hesitate to regard it as a top-ten lifetime holding.
But Mr. Neff doesn’t manage it. The company is run by Andrew MacKenzie, who I believe has one of the worst appreciations for the reality of the commodity business cycle out of any head of a major commodities-producing firm.
BHP Billiton’s capital allocation decisions are … Read the rest of this article!