BHP is the worlds largest resource company, by a long shot. It is bigger than number 2 and 3 combined. It's price has doubled in a couple of years. The world is in a mad commodities boom and analysts are projecting earning based on historical metal prices.
The trustees believe that the fund requires exposure to the commodities boom. We realise that it may be a rocky road, but in the long term China and India need the commodities to fuel their growth so there is little downside risk in BHP.
Therefore, the fund will Sell to Open BHPWZ Feb 24 Puts which had a last trade price of .48. If the price of BHP falls and the puts are exercised the costs price will be 23.52 (excluding commissions), compared to a closing price of 24.45. At this time and with the recent peak in the price the fund will only sell 1 option.
Return on risk is about 2% for 31 days holding.
We have been looking at ways to get exposure to the commodities boom as the super members do not have any other exposure to commodities at this point. The tipping point was the Feb 2006 issue of True Wealth by Steve Sjuggerud, strongly recommending BHP.
Dividends are a paltry 1.6% or so, 100% franked. Last ex dates were 28 Feb 05 and 5 Sep 05.
Need to check recent filing for next ex date. Neither ASX or income investor list any announced date.
Saturday, January 21, 2006
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