Investors’ Dilemma: Anglo American or Bhp Billiton

Introduction

This report will attempt to outline strong and weak aspects of two companies for the purpose of making an investment decision. Two chosen companies are BHP Billiton (BHP) and Anglo American (AAL). Both these companies are the largest enterprises within mining industry. BHP and AAL are publicly-traded companies and their shares are listed on New-York and London stock exchanges.

In order to make sound investment decision relevant theoretical basis will analysed. The technical analysis, efficient market selection approach and fundamental selection methods will be discussed. The fundamental selection method involves using qualitative and quantitative information. In the qualitative part the company management, public relations, environmental problems and other important issues will be evaluated. The quantitative part will be based on ratio analysis. The interpretation of ratio analysis will be key to the investment decision. The figures for ratio analysis will be taken from financial statements provided in annual reports of the respective companies. The ratio analysis will include liquidity, efficiency, investor ratios and other major performance indicators. The evaluation and assessment of these figures will be the most important part of the report. The conclusion will include recommendations as to which company is a “better investment”.

Mining industry

The mining industry represents an important sector of the global economy. Modern exploration and mining is mostly conducted by large enterprises and require large volume of capital to establish and function. Hence, the mining sector of the industry is mostly controlled by public-listed companies that are multinational.

Mining operations can be classified into the following five major categories: oil/gas extraction, coal mining, metal-ore mining, nonmetallic mineral mining and quarrying, and support functions for mining.

The largest global mining company is BHP Billiton located in...