The Motley Fool

Stock market crash: here’s what mega-miner BHP thinks will happen next

Image source: Getty Images

I reckon the big mining companies are good to follow for one important thing. They have a unique position at the start of the production chain for industry. And that makes their insights about the outlook for the world economy useful for investors.

The slump after the stock market crash

In today’s full-year results report, BHP (LSE: BHP) delivered some lacklustre figures. Net operating cash flow dropped by 10% compared to the year before. Underlying basic earnings per share rose by 2%, but the directors trimmed the full-year dividend by 10%. At least one figure did go up: net debt rose by 28% to just over $12bn.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Looking ahead, the company reckons the world’s economies will contract in 2020 because of the Covid-19 pandemic. However, China will fare better. But in 2021, BHP expects a “solid” rebound, albeit with “considerable variation” between countries.

However, even with the rebound, BHP expects the world economy to be around 6% smaller than it would have been without Covid-19. The company assumes it will take China and the developed world until 2023 to return to pre-Covid-19 trend growth rates. And developing economies outside East Asia “may take longer.”  

But it’s not all bad news. Although inflation trends and exchange rates have been volatile, many of BHP’s uncontrollable cost exposures such as diesel, power, explosives and steel products have declined in the last six months. And other industries will likely be benefitting from reduced costs in those areas too.

BHP’s directors also point out that Covid-19 has profoundly affected national and regional labour markets. They think labour costs will remain lower than anticipated before the pandemic “for some years” in the mining industry. It seems reasonable to assume there’ll be downward pressure on wages in other sectors as well.

Bullish for the long term

BHP expects the ongoing uncertainty around the pandemic to constrain the risk appetite of households and businesses. And that will likely cause a dampening effect on the global economy. But the directors are positive about long-term global economic growth and commodity demand. They think population growth and rising living standards will drive demand “for decades to come” for the products BHP provides such as energy, metals and fertilisers.  

Looking back, the stock market has done well over the past decades, despite many previous challenging times. So investing in shares backed by good-quality businesses will probably work out well if we aim to hold our investments for many years.

I’d research quality stocks in a range of sectors to buy and hold, such as Unilever, Diageo, Sage, PZ Cussons and many others. But I’m not keen on exposing my portfolio to BHP right now. Shares backed by cyclical businesses can be decent vehicles for making a bet on the next up-leg. But the share is trading in the middle ground. And I’d want to see it in an obvious cyclical trough before investing.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic…

And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

Kevin Godbold owns shares in PZ Cussons. The Motley Fool UK has recommended Diageo, PZ Cussons, Sage Group, and Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.