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Which Stocks Do Analysts Love amid Iron Ore Price Volatility?

Anuradha Garg - Author

Sep. 6 2018, Updated 4:48 p.m. ET

BHP Billiton’s ratings

According to the consensus compiled by Thomson Reuters, 17 analysts cover BHP Billiton (BHP) stock. Of these analysts, 53.0% recommend a “buy,” 41.0% recommend a “hold,” and 6.0% recommend a “sell” for BHP stock.

The analysts’ sentiment for BHP has improved. Until the end of March, about 40.0% of the analysts recommended a “buy” for the stock. Analysts appear to be happy with BHP monetizing its US shale assets and with its returns to its shareholders.

These analysts’ consensus target price for BHP is $35.10, which implies an upside of 5.8% to its current market price. The upside potential for its peers (XME) Vale (VALE), Cleveland-Cliffs (CLF), and Freeport-McMoRan (FCX) are 17.5%, 21.8%, and 36.1%, respectively.

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Upgrades and downgrades

The latest rating change for BHP stock has come from Investec, which downgraded the stock from “buy” to “hold” on June 15. On June 7, J.P. Morgan (JPM) upgraded BHP stock from “neutral” to “overweight.” JPM also upgraded BHP’s peer Rio Tinto (RIO).

These upgrades are a result of J.P. Morgan’s analysis of the next generation of iron ore and coal projects. According to its findings, “strong prices are required to incentivize supply to come online.” JPM raised the long-term outlook for iron ore prices to $60.00 per ton.

Bank of America and Barclays

Prior to J.P. Morgan’s upgrade, Bank of America Merrill Lynch had downgraded BHP to “neutral” from “buy” on June 5. On May 4, Barclays upgraded BHP to “equal-weight” from “overweight” and downgraded Rio Tinto (RIO) from “overweight” to “equal-weight.”

As reported by Proactive Investors, Barclays analysts wrote in a note to investors, “Following 40% underperformance vs. RIO over the last 5 years, we believe the stage is now set for BHP to recover at least some of that underperformance over the next 12 months.”


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