After rebounding strongly on Tuesday, the BHP Group Ltd (ASX: BHP) share price has given back some of its gains on Wednesday.
The mining giant's shares finished the day 2.5% lower at $28.52.
Today's decline means that BHP's shares are now down almost 33% from their 52-week high of $42.33.
Is this a buying opportunity?
Whilst the share market may remain a little bumpy until the coronavirus situation eases, I think it could still be worth considering an investment in BHP's shares at current levels.
Especially if you're looking for a way to diversify your portfolio or you're an income investor looking to beat low interest rates.
In respect to the latter, I estimate that BHP will pay a dividend of US$1.20 or A$1.85 per share in FY 2020. This equates to a fully franked 6.4% dividend yield based on today's close price.
I'm not alone in thinking that BHP's shares are in the buy zone.
According to a note out of Goldman Sachs this morning, its analysts have retained their buy rating but trimmed their price target on the Big Australian's shares to $39.00.
This price target implies potential upside of almost 37% over the next 12 months excluding dividends or 43% including them.
What did Goldman Sachs say?
Goldman Sachs held firm with its buy rating after looking at the impact of the oil price collapse on its financial performance.
Although BHP is the most exposed to oil of the Australian bulk miners, it doesn't appear concerned by the collapse in prices. It notes that BHP's FY 2020 oil unit cost guidance is US$10.5 to US$11.5 per barrel, which still makes its operations highly profitable.
It also points out that oil is a natural hedge for BHP as diesel/oil represents ~7% of its total cost base. In light of this, it expects the decline in earnings from its oil unit to be offset partially by lower fuel costs across it operations.
Goldman said: "We lower our BHP FY20/FY21 EPS by 7%/2% on the lower oil price, this is partly offset by lower unit costs across the large iron ore, met coal and big copper (Escondida and Spence) open pit operations, and our lower AUSUSD and freight rate assumptions."
I think Goldman is spot on and would buy its shares just ahead of Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG) right now.
