It's been a painful 12 months for shareholders of mining giant BHP Billiton Limited (ASX: BHP).
What started off as a rollercoaster ride has turned into something more resembling a nightmare. The miner's shares soared as high as $39.74 in August before plunging to a 15-month low at around $31.90, though they've recovered marginally since then and are now trading at $33.71.
Given that the shares are still trading at a 15.2% discount compared to August, many investors are wondering whether now is the time to stock up? So let's take a look…
It's worth noting that much of the volatility surrounding the stock has come from the fluctuating iron ore price. The commodity is now trading at US$78.50 a tonne, which is nearly 42% below its 2013 price and well lower than what most analysts had been expecting. Indeed, BHP's shares have fallen a further 0.9% today after the iron ore price dropped 0.6% on Friday.
Although the tumbling iron ore price will certainly impact BHP's overall margins, it is well equipped to cope with the new low price environment. Like Rio Tinto Limited (ASX: RIO), BHP maintains a low breakeven price and is heavily ramping up its supply levels, which will at least partially offset the impact of the falling price.
What makes it a better bet than Rio Tinto however, is that it maintains far more diversified operations, making it a much safer play. While Rio Tinto derives around 90% of its earnings from iron ore operations, BHP's are wider spread between iron ore, copper, petroleum and coal, leaving it less exposed to any one particular commodity.
Should you buy?
If I were to buy any mining stock today, it would definitely be BHP Billiton. Given the high level of volatility currently blanketing the sector, BHP's safety and diversification would go a long way to helping me sleep at night knowing my investment was in safer hands.
In saying that however, I'm also not so bullish on the iron ore price. As Chinese demand growth continues to fall, a tidal wave of fresh supplies are also making their way into the market, which I believe will see the commodity's price fall even further over the coming months. As such, I can't help but think investors who remain patient could be offered an even more appealing price to buy BHP at some point in the near future.
