BHP Billiton: A Great Commodity Play

BHP is the world's largest diversified resource company and is dual listed on the London and Australian stock exchanges. Its roots date back to the 1800's but it has existed as BHP Billiton since 2001 following the merger of BHP with Billiton. The company maintains its headquarters in Melbourne, Australia. BHP explores for, mines or produces the following commodities: Petroleum, Aluminum, Base Metals (silver, zinc, lead, uranium etc.), Carbon Steel Materials, Diamonds, Energy Coal and Stainless Steel Materials.

The company has benefited greatly in recent years from rising commodity prices and will in all likelihood continue to do so in the future. While I do like some of BHP's rivals, namely Anglo-American (AAUK) and Rio Tinto (RTP), I think BHP is the best of the bunch. The company has fatter margins than its rivals and trades at a forward PE of 15 even after its dramatic rise over the last 5 years, when it has been up 488%. While I prefer using commodity futures to get direct commodity exposure, a company like BHP can get similar exposure with some idiosyncratic risk.
BHP is up over 72% this year, RTP is up 45% and AAUK us up over 32%. It has been a hot sector, which makes me a little bit nervous. But, I still think rising demand for commodities from China, India and elsewhere make the sector a good value even at these prices.