Warren Buffett has been by far one of the greatest investors in the world, leading Berkshire Hathaway to incredible long-term returns. I believe this is a good time to consider whether Buffett would be interested in BHP Group Ltd (ASX: BHP) shares, Australia’s biggest company.
Berkshire Hathaway is best known for its investments in areas like insurance, banking, railroads, Coca Cola, Apple and a few others. Mining has not been one of his key areas of focus.
But, Buffett is an American who has focused on American shares. Perhaps if he were Australian, he might have considered BHP shares as a possible investment?
Why Buffett may have considered BHP shares
Warren Buffett and Charlie Munger together had a great track record of picking long-term, compounding businesses.
They would aim for high-quality businesses with strong economic moats. In other words, companies with competitive advantages that are expected to endure and help them fight off challengers.
The duo in charge of Berkshire Hathaway once commented that they’d rather own a wonderful business at a fair price than a fair business at a wonderful price. BHP is certainly a wonderful company that’s among the world leaders at producing iron ore, with very low operating costs.
Additionally, the company has pleasing growth prospects in terms of copper projects and potash (which is seen as a greener fertiliser).
If commodity, particularly copper, prices continue rising as time goes on, this could be very beneficial for BHP’s margins. The prospects look good for copper, considering the ongoing electrification and investments in battery energy storage around the world.
However, it’s not all positive when considering BHP shares.
Factors going against an investment
Warren Buffett is a fan of being greedy when others are fearful and fearful when others are greedy. The market has clearly been excited about the ASX mining share â the BHP share price has risen more than 70% in the past year.
BHP is what could be called a price-taker rather than a price-maker. It sells its commodities based on resource prices, rather than being able to dictate what price it charges customers/subscribers like plenty of high-quality shares out there.
Buffett does not have much of a history of buying price-takers, particularly miners.
I could understand Warren Buffett being interested in BHP shares if it were trading at a cyclical low point, but it’s trading at close to an all-time high. Investing at the low point of a cycle can be a contrarian and very rewarding investment.
So, I’d suggest there are other ASX shares that Warren Buffett would rather invest in today.
The post Would Warren Buffett buy BHP shares? appeared first on The Motley Fool Australia.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple. The Motley Fool Australia has recommended Apple and BHP Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.