BHP Group (BHP): Evaluating Its Position Among the Top Buy-the-Dip Stocks

We recently compiled a list of the 7 Best Buy-the-Dip Stocks to Invest In. In this article, we are going to take a look at where BHP Group (NYSE:BHP) stands against the other buy-the-dip stocks.

It’s every investor’s goal to buy a stock well poised to beat the average return of market indexes. However, with valuations getting out of hand after one of the longest bull runs, very few stocks offer significant upside potential. Nevertheless, some stocks have been battered by deteriorating economic conditions fueled by higher for longer rates.

While it might seem too late to buy stocks with major indices led by the Nasdaq 100 and S&P 500 flirting with record highs, there are still stocks that have been left out from the rallies. Buying the dip is a proven strategy for risk-tolerant investors who are always looking to take action during market downturns.

READ ALSO: 7 Best Beaten Down Stocks to Invest In and Billionaire Carl Icahn’s Top 10 Stocks.

The strategy allows one to buy low when fear has taken over after a deep pullback. It is particularly an effective investment strategy for long-term investors looking to hold stakes in quality stocks for the long haul.

As depicted by the Institute for Supply Management, manufacturing production in the biggest economy slowing down in August is the latest sign that all is not well. Disappointing data with ISM dropping to 47.2 from 48  is the latest sign of slowing growth within the US economy.

According to Larry Tentarelli, chief technical strategist at the Blue Chip Trend Report, the market is expected to be choppy and volatile as it has become data-dependent. Consequently, now would be the best time to be highly cautious, focusing on high-value targets trading at discounted valuations.

On the other hand, Fundstrat’s head of strategy, Mark Newton, believes the market is flashing a handful of signs that there is more upside on the way even as the major indices remain at record highs. According to the analyst, any tech-driven stock pullback presents an ideal buy opportunity on the dip. According to the equity analyst, looking to buy dips makes sense technically, especially for small-cap stocks that look appealing after their recent slide.

The deep pullback in some stocks amid growing concerns about the health of the US economy presents one of the best opportunities to buy the dip of quality stocks trading at discounted valuations. Growth stocks are some of the best, given their track record in outperforming the market.

Certain high-value stocks that have traditionally been steady have recently suffered due to a mix of increasing inflation and high interest rates. In a similar vein, in 2024, there was a shift among investors from big tech firms to smaller, more volatile stocks. Spotting these declines could offer a chance to invest in major companies trading at discounted valuations.

Our Methodology

To make our list of the best buy-the-dip stocks to invest in, we first made a list of stocks in various industries that are trading near their 52-week lows or have pulled back significantly from their 52-week highs. We checked the hedge fund sentiment around 15 stocks with the largest market caps and then selected the 7 stocks that were the most popular among hedge funds. We then ranked the stocks in ascending order based on the number of hedge funds that hold stakes. Our list contains some of the highest quality companies in different industries including mining, energy, consumer staples, retail, aerospace, tech, and more.

At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

An aerial view of a mining operation in action, with large trucks and yellow diggers.

BHP Group (NYSE:BHP)

52 Week Range: $51.73 – $69.11

Current Share Price: $52.34

Number of Hedge Fund Holders: 22

Market Capitalization as of  September 4: $136.36 Billion 

BHP Group (NYSE:BHP) is a resources company that mines copper, uranium, gold, zinc, and silver, among other metals. In addition, it provides towing, freight, marketing and trading, marketing support, finance, administrative, and other services.

It is one of the stocks trading on the dip, having come under pressure following the collapse of its plan to acquire Anglo-American for $43 billion. Given its higher-margin cash-generative assets, the acquisition was expected to strengthen its growth metrics. Additionally, BHP Group (NYSE:BHP) has suffered following the drop in iron ore from $140 per ton to below $100 per ton.

Amid the headwinds, the company has remained afloat, as depicted by its solid financial results. The mining giant delivered $55.7 billion in revenue for the entire year, which ended June 30. Its attributable profit rose 2% to $13.7 billion.

BHP Group (NYSE:BHP) achieved record production levels at its Western Australia Iron Ore operations, solidifying its position as the leading iron ore producer at the lowest cost globally. Copper production increased 9% for the second year in a row, with an expectation of adding another 4% in the fiscal year 2025.

The impressive performance, backed by a strong financial position, led the company to a final dividend of 74 US cents per share, maintaining a payout ratio of 53%, which aligns with its history of providing strong returns to shareholders throughout various market conditions.

BHP Group (NYSE:BHP) ‘s long-term outlook remains positive, especially on iron ore prices recovering amid strong demand from China. Additionally, the company is aiming for the right moves in diversifying its commodity portfolio into copper to reduce reliance on Iron ore.

Additionally, BHP Group (NYSE:BHP) is one of the best buy-dip stocks to invest in, as its shares have a dividend yield of 5.30%, which is perfect for generating some passive income. After the deep pullback, the stock trades at a discount with a price-to-earnings multiple of 9.

In the second quarter, 22 hedge funds held stakes in BHP Group (NYSE:BHP), totaling $1.25 billion. Fisher Asset Management emerged as the largest shareholder, with a stake valued at $1.21 billion as of June 30.

Overall BHP ranks 7th in our list of the buy-the-dip stocks to invest in. While we acknowledge the potential of BHP as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BHP, check out our report about the cheapest AI stock.

 

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Disclosure: None. This article is originally published at Insider Monkey.