BHP Group Limited: A Top ASX Stock Pick for Hedge Funds?

BHP Group Limited (BHP) has caught the attention of hedge funds, with 22 funds holding the stock as of Q3 2024. This article explores the reasons behind this interest and examines whether BHP is indeed one of the best ASX stocks to buy according to hedge funds.



BHP's diversified portfolio and strong financial performance are key factors that have attracted hedge funds. The company operates in a range of commodities, including iron ore, copper, coal, nickel, and potash, which helps mitigate risk and ensures a steady revenue stream. BHP's consistent earnings growth and dividend payouts have also contributed to its appeal.

Moreover, BHP's exposure to commodities like copper and iron ore plays a significant role in hedge funds' investment decisions. Copper, in particular, is expected to see significant demand growth in the coming decades, driven by applications in electric vehicles, renewable energy, and other technologies. BHP's copper production exceeded expectations by 8% in the most recent quarter, and the company is expanding its copper operations, with plans to increase production at the Olympic Dam operation in South Australia and invest in new leaching technology at the Escondida mine in Chile. These developments suggest that BHP is well-positioned to capitalize on the growing demand for copper.

Iron ore, another key commodity for BHP, has also seen strong demand, particularly from China. However, recent market trends indicate a slowdown in Chinese demand, which could impact iron ore prices. Despite this, BHP's strong financial performance and high margins make it an attractive investment opportunity for hedge funds.

BHP's current valuation and growth prospects compare favorably to other ASX-listed stocks favored by hedge funds. The company's P/E ratio of 16.5 is lower than the average P/E ratio of 18.5 for the ASX 200, suggesting that BHP may be undervalued compared to the broader market. Additionally, BHP's P/S ratio of 2.23 is lower than the average P/S ratio of 3.5 for the ASX 200, further indicating that BHP may be undervalued.

In conclusion, BHP Group Limited's diversified portfolio, strong financial performance, and exposure to high-demand commodities like copper and iron ore make it an attractive investment opportunity for hedge funds. The company's current valuation and growth prospects also compare favorably to other ASX-listed stocks favored by hedge funds. As such, BHP is indeed a top ASX stock pick for hedge funds to consider.