Originally recommended BHP Billiton (NYSE: BHP) on February 15, 2010 (IWB #20107) at US$72.13. The stock closed Friday at US$66.39.
This has been one of my favourite stocks over the years but the recent 40% resources tax proposed by the Australian government has shaken my confidence. The tax is supposed to kick in on July 1, 2012 and may get killed or modified in the meantime but it certainly puts a nasty overhang on the entire Aussie resources sector. Talk about killing the goose that has laid golden eggs for years!
This proposed tax plus the fears around China's potential inflation bubble spell trouble in the short term for this international mining giant. Were it not for all this I would be loading up on these shares since I love the prospects for commodities over the long term and BHP is one of the best producers. But in the light of the current situation it might be better to look for other mining options until things clear up.
Action now: Sell. I will suggest alternatives in a future column
Disclosure: Author holds a short position in BHP