Business reporters, like those on the ABC, keep referring erroneously to BHP Billiton and Rio Tinto as diversified

John Robertson

PortfolioDirect

Business reporters, like those on the ABC, keep referring erroneously to BHP Billiton and Rio Tinto as diversified. The days when copper and iron ore moved to a different beat and it made sense to distinguish metals from bulk commodities have long gone. Iron ore and copper are now the same commodity, at least as far as their risk profiles and economic attributes are concerned. Consequently, the two Australian market leaders are no longer diversified in an economic sense since the largest part of their earnings come from these two commodities. That poses a giant problem for nearly everyone with exposure to an Australian equities portfolio. The most widely held stock - BHP Billiton - is being bought on a mistake. It has a de facto risk profile few would knowingly choose against the backdrop of overstocking of these two commodities by Chinese financiers.


John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...

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