BHP Billington is the world’s largest mining company, and the world’s third-largest company of all types. It has had a lot of success, and in common with other mining companies, buys and sells holdings and minor companies frequently to advance its business. It is not only quoted on the London Stock Exchange, but also in Australia where its head office is in Melbourne.
As a measure of the size of the company, it has about 100,000 employees in 100 locations around the world, and is the world’s largest producer of many commodities such as aluminium, copper, iron ore, titanium, silver, uranium, as well as energy products such as coal, oil, and gas. The diversification is important for the stability of the business. It shed around 6000 employees during the global economic crisis, but has basically been on a path of growth for the last decade – it was established in 2001.
The BHP part of the name comes from the Australian Broken Hill Proprietary Company Limited, which had been in business since 1885, and started by mining silver and lead in an area called Broken Hill in New South Wales. Billington was a mining company dating back to 1860, originating in the Netherlands, and undergoing various changes of ownership. Its later years were focused on South Africa, and BHP Billington is still quoted on the Johannesburg Stock Exchange.
The Australian and the London operations of BHP Billington share the same board, but are separate shareholder bodies. The headquarters are in Australia, with London being called a major management office. As always with a mining company, you should expect volatility, but BHP Billington is an extreme example of size smoothing out the bigger bumps in the pricing. It is worth noting that companies like BHP Billington also have considerable assets and liabilities and they tend to structure their businesses to smooth out currency fluctuations. A company like BHP might for instance decide to sell USA debt to help it offset the USA assets they now own in several currencies; one prime example being Petrohawk, the shale gas producer that BHP recently acquired.
You will find stock price reactions to various news items such as discoveries and resource estimates, and the diversity of products makes BHP Billington seem a reasonably sound long-term investment, outside of the trading possibilities.
Spread Betting BHP Billington Rolling Daily
BHP Billington is a natural resources company, mining many different commodities, and is based in Australia with a head office in London. The current quote for a daily rolling spreadbet is 1909.6 – 1913.9, and if you think that the current down-trend is going to continue then you might want to place a short bet on this stock for £5 per point.
If you’re right and the price continues going down, you may see an opportunity to close the bet and take your profit when the quote reaches 1792.5 – 1796.8. If you do this, you can work out your winnings by taking the closing buying price of 1796.8 from the opening selling price of 1909.6. This is 112.8 points, which works out to a profit of £564.
But it would be wrong to think that you will always make winning bets, and you must be able to determine the impact of your losses. Say the price turned around and started going upwards after you placed your bet, you might find that you have to close the spread bet when the quote is 1998.2 – 2002.5. In this case the closing price would be 2002.5, and with an opening price of 1909.6 you would find you had lost 92.9 points. That would cost you £464.50.
Instead of watching the price and deciding when to close a losing position, you could also set a stoploss order when you take out your spread bet, and that would tell your spread betting company to close the bet when the price reached a certain losing level. Say you placed a stop loss order that took you out of the spread trade when the quote was 1956.9 – 1961.3.
In this case, your bet closed at 1961.3, so taking off the opening price of 1909.6 you find you have lost 51.7 points. For your chosen stake, this amounts to a loss of £258.50.
BHP Billington Futures
The price of a futures based spread bet is always dependent on the single stock futures market, and not the view of your spread betting broker. For BHP Billington, the current quote for the far quarter is 1920.1 – 1932.1, which shows some growth from the current spot price. Say you agree that the stock will be increasing in price, you might want to place a long bet for £6.50 per point.
If you are correct, and the price goes up, you should choose to exit your spread trade when you think it is nearing its current peak, and losing momentum. Perhaps this would be in a few months when the quote is 2053.7 – 2062.5. As you placed a long bet, it went on at the buying price of 1932.1, and closes at the selling price of 2053.7. This means you gained 121.6 points, or £790.40 on your bet.
But prices can go down as well as up, and if the price dips first, you have to decide when you will close your spread bet and accept your losses, before they become too large. Perhaps this is when the price goes down to 1831.0 – 1842.5. To work out your losses, you simply take 1831.0 from the opening price of 1932.1, which is 101.1 points, and multiply by your stake to get the result of £657.15.
It is often recommended that you use a stop loss order to close a losing spread bet automatically. This means that you do not have to monitor the price all the time, and also helps overcome the emotional problem of closing a losing trade in a timely manner. If you had set a stoploss order on this spread bet, you might find that the trade was closed when the price dropped to 1885.2 – 1896.3. This time the number of points you lost is 1885.2 taken away from 1932.1, which is 46.9 points, which costs you £304.85.