Go figure, BHP reports a mammoth 60% increase, with $12bn in cash - wow. Prior to results, BHP was sitting on a PE of 17, so we can figure that it now sits on a PE of about 12 probably - which is its long term average. So is BHP a buy? Market reaction today would indicate otherwise - go figure! Seems to be a lot of perception out there about a commodity bubble. Do people really think such a bubble will unwind itself overnight?
BHP's market cap is about US$260bn (I think?). So if they are buying back US$10bn of shares, that is a little less than 4% of the total market cap taken out of circulation. So you can expect your investment to be worth 4% more next year. It also equates to about 250m shares, if my calculation is correct. That is about 25% of total JSE volumes of BHP shares traded per year. JSE makes up about 1 quarter of the total market cap, so that is 40m shares from the JSE alone. That is about 6% of all BHP trades on the JSE. Significant, wouldn't you say?
BHP is buying back share because of its inability to invest in income generating companies/projects. I think that's why the market does not react favourably for now - where will future growth come from. Returning capital to shareholders is good, but second best to investing for growth.
Yip, Marius is 0 for 3 on identifying and securing a big growth generating acquisition. There was a recent unbundling of one of the big potash players in the States, which I reckon BHP will have their eye on after the failed Canadian Potash bid.