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Which is the better prospect for traders?
One has to be careful when making these sorts of comparisons as there are technical analysis limitations. Nevertheless, here goes. Let’s begin with a 30-year quarterly comparison chart:
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Both have experienced phenomenal growth over this period and have made many investors into millionaires.
BHP has significantly outperformed RIO over this time and there is no doubt BHP is - and has always been - the darling of the market. This was clear to me during the ten years I worked for the Big Australian - a BHP business card opened any door. Its history is almost without blemish whereas RIO has had its share of distractions along the way. Today, despite having sold off many divisions, BHP is still a much larger company with more diversified mining activities and reserves.
I suggest you also do a ‘fundamental’ comparison of the two giants in ProfitSource.
Almost all major Managed Funds hold BHP but most generally hold both as RIO also has a significant index weighting. Some private investors ignore RIO as they consider BHP provides adequate exposure to the resources boom. For some, it makes more sense to hold junior miners or explorers to tap into a slightly more active approach to the sector. But this is not for everyone.
Both show some sign of easing in the coming weeks. I showed BHP last week and so here is the RIO weekly Elliott Wave chart:
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Our interest is in what lies is ahead but I can barely find a pulse in either BHP or RIO. Beyond the near-term I can’t really see much upside for either of them and both are more likely to tread water. Here is the RIO monthly, which is (like BHP) in a range trading pattern:
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We should remind ourselves that range trading can still mean volatile times but I do not expect either to fall out of the sky in the coming weeks, despite the Euro outlook and slowing growth in China.
There is a prospect of making money by shorting either BHP or RIO in the near term and I prefer BHP because of the liquidity, which is an important factor when unwinding positions.
To make money on the long side, we will have to search for value outside these two big players. Watch this space.
Enjoy the ride
Tom Scollon
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