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Natural-Resources Giant Flashes a 'Buy' Signal

BHP is not in an uptrend yet, and it briefly broke below $70 on April 11. It may have farther to fall before moving higher. Many of the metals and minerals it mines and produces are in price-correction mode, and that may be one of the reasons to be cautious about owning the shares yet.

As Badiali points out: "The average bottom in the price-to-book value is 2.44. At today's book value, that works out to $62 per share, about 10% below its current price. The low in the price-to-book value over the last 13 years is 2.16. That would be 18% below its current price."


Yet if you're willing to average down, now may be an opportunistic point to begin doing a bit of "schnitzeling" as our own Jim Cramer likes to call it. For those of you who don't know what "schnitzeling" is, it is Cramer's way of buying a little at a time.

If shares drop much lower, you can buy in larger increments. In the meantime, you'll be getting paid to wait with a rewarding dividend and nice upside potential. With a forward (one-year) PE ratio of 15 and its impressive trailing 12-month operating margin of nearly 30%, BHP looks very promising.

Disclosure: As of the time of publication, the author bought a LEAP call and sold a LEAP put on shares of BHP, but does not own any other stock or ETF mentioned in this article.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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