The BHP (ASX:BHP) share price is Goldman Sach’s top pick for iron ore

Goldman Sachs prefers the BHP Group Ltd (ASX: BHP) share price ahead of Rio Tinto Ltd (ASX: RIO) and Fortescue Metals Group Ltd (ASX: FMG)
The post The BHP (ASX:BHP) share price is Goldman Sach’s top pick for iron ore appeared first on The Motley Fool Australia. –

A happy miner tips his hard hat, indicating good ashare price results for ASX mining stocks

What a year 2020 was for iron ore. The steel-making metal soared to a 7-year high while ASX iron ore miners delivered market leading returns on improved profitability and record dividends

The Goldman Sachs commodities team is bullish on commodities and iron ore in 2021. Its 2021 sector outlook and themes report released on Wednesday points to recovering global demand, low inventories and supply constraints and a weakening US dollar to support commodity prices.

In this report, the BHP Group Ltd (ASX: BHP) share price has emerged as the broker’s top iron ore pick. 

Bullish but valuations are fair

Despite the bullish sentiment for commodities and iron ore, Goldman views the sector as ‘fairly valued based on a discounted cash flow (DCF) basis’. 

As a result, other ASX iron ore miners such as Rio Tinto Ltd (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG) received neutral ratings after both companies soared in 2020 and early 2021. 

Goldman rates BHP share price as a buy 

BHP has emerged as the preferred pick based on valuation, commodity mix, better operating performance and more compelling medium to long-term production growth. 

Goldman raised its BHP share price target to $48.70 with a buy rating. This represents an upside of around 5%, and does not include its current dividend yield of 4.50%. 

The broker says that “BHP’s portfolio is in a very strong position” and forecasts a “circa 65% increase in EBITDA and doubling of free cash flow (FCF) in FY21”.

The company’s strong financial performance will be underpinned by a fall in capex to US$7 billion as major minerals projects are completed, but also driven by positive copper prices and a recovery in met coal and oil prices in CY21. 

The report does flag BHP’s softer December quarter due to production disruptions across copper, iron ore and oil. However, points to improved production moving forward with higher copper production, improved coal demand and oil acquisitions being finalised. 

Long term, the broker is positive on BHP’s organic growth options, particularly in oil where it sees a possible 50% growth in volume to +150 million barrels of oil equivalent (MMboe).

At the time of writing, the BHP share price is trading up 0.41% at $46.19.

Man who said buy Kogan shares at $3.63 says buy these 3 ASX stocks now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

In this FREE STOCK REPORT, Scott just revealed what he believes are the 3 ASX stocks for the post COVID world that investors should buy right now while they still can. These stocks are trading at dirt-cheap prices and Scott thinks these could really go gangbusters as we move into ‘the new normal’.

Find out the names of our 3 Post COVID Stocks – For FREE!

*Returns as of 6/8/2020

More reading

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post The BHP (ASX:BHP) share price is Goldman Sach’s top pick for iron ore appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!