Ultimate Global Growth Trade
Despite the credit crunch and amid see-saw-like volatility, commodities continue to break records. Monday was a record day for oil and gold is at its highest price since May 2006. Are commodities still the route to riches?
You might call this the ultimate play on global growth and it's not based in London, New York or even Shanghai. No, this play comes from the land down under where the melted copper flows and coal mines thunder.
We’re talking about BHP Billiton (BHP), an Aussie mining conglomerate which traces its roots back to 1883. Today it’s the biggest commodities company on the planet with annual revenue reaching $48 billion. (That’s more than Apple, Google & Nike combined.)
BHP provides much needed copper, iron, aluminum, oil and gas to a resource -hungry China and India. And the best part for American traders is that BHP trades right here on the New York Stock Exchange.
Will our globe keep growing and overcome the recent credit crunch and recession worries? The company that has the most at stake, tells us right now.
BHP Billiton Chief Financial Officer Alexandre Vanselow joins the panel for this conversation. Here are excerpts from what was said.
Is the global growth story in tact?
“Yes, what we see on the ground is in tact” says Vanselow. “Basically the credit issues in the States go unnoticed (elsewhere in the world).”
Is that because it’s not relevant to your business?
“If you look at the drivers of the economy in China and India (a large organization of a mass of people), it has very little to do with what’s happening in the US.” says Vanselow.
But, aren't North America and Europe still the largest consumers of metals?
“No, China is now the largest consumer of copper, steel and aluminum,” says Vanselow.
Are you saying you can endure a US recession and see no disruption in metals demand?
“That’s absolutely right,” replies Vanselow.
When do you see growth in China and India starting to slow?
“(We) see multi-decade growth,” answers Vanselow. India is behind China and will continue to be behind China.”
Who is the next India?
“We are currently just trying to meet the demands of China and India. To think of another one is a bit scary!” replies Vanselow.
How do you keep growing?
“We started M&A back in 2001,” says Vanselow. “We (believe) that growth is the future so we did the BHP Billiton merger. And we did a very large acquisition in 2005.
He adds “Now, we have a very strong organic pipeline so we’re able to handpick acquisitions as they make sense.”
Would you buy Alcoa?
“I won’t talk specifically about another company, but what we are interested in is low cost “option-ality” and growth. (A company in which) you can expand growth and become more productive from that.”
Dylan Ratigan asks the panel what they think of BHP stock?
Pete Najarian likes it.
The other traders are much more cautious.
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Trader disclosure: On Sept. 17, 2007, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (EMC); Najarian Owns (VMW); Najarian Is Short (ETFC); Najarian Owns (GS) Options: Finerman's Firm Owns (TXI), (WMT), (TGT), (COP); Finerman's Firm Owns S&P 500 Puts; Finerman's Firm Owns Russell 2000 Puts; GE Is The Parent Company Of CNBC