The BHP Group Ltd (ASX: BHP) share price is down 8.79% year to date but continues to climb higher since its March lows.
BHP shares fell as low as $24.05 on 13 March in the midst of the bear market. However, the company’s share price is back up to $35.50 and is now outperforming the S&P/ASX 200 Index (ASX: XJO) in 2020.
So, is this just a flash in the pan or is the BHP share price back in the buy zone this year?
Why the BHP share price could be a buy
BHP is a diversified miner with strong operations across iron ore, copper, aluminium and diamonds. This means there are a lot of potential earnings streams to help weather the current downturn.
I think we’ll continue to see strong demand for iron ore in 2020. The coronavirus pandemic has sparked what looks to be a global recession with governments across the globe trying to stabilise their economies.
One of the easiest ways to do this is through infrastructure spending. I think we could see governments like China and Australia turn to infrastructure to boost employment and economic output.
That’s good news for the BHP share price and the company’s shareholders. Iron ore is a basic material used for steel production and any infrastructure projects could help support global demand.
What are the downside risks?
Despite some strong tailwinds, there are risks to buying the BHP share price at $35.50.
Geopolitical tensions remain high in 2020. That means we could see further trade wars either between the USA and China or China and Australia.
That’s bad news for major exporters like BHP. The other risk factor is just the uncertainty. No one really knows what the future holds in the coming months, let alone years.
Given the current economic climate, I think it’s quite likely we will continue to see sharp BHP share price movements for at least the next few months. If you’ve got what it takes to ride out this short-term volatility, BHP could still represent solid, long-term buying at current prices.
Here are a few more cheap ASX shares that I would check out in the current market.
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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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