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Commodities: The Nature Of The Beast
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To most investors, BHP Billiton ((BHP)) is pretty much the same as Woolworths ((WOW)), or Westpac ((WBC)), or Telstra ((TLS)). They're all listed blue chips, it's just that BHP's major growth engine is different while the others, Telstra on top, pay a higher dividend. Alas, nothing could be farther from the truth.
As consumers we find it logical to pay attention to intrinsic differences and we probably never question them. Some shoes are for rock climbing, others for running, others for ball room dancing. Unless we're aiming for a prank, we never take our rock climbing shoes to the ball room or vice versa. In a similar vein, a Porsche 911 is ideal for pushing the pedal to the metal on a race track but we would never consider it for traveling via unkempt dirt tracks in mountainous Afghanistan. Usain Bolt is the world's fastest man on the 100 meters, but don't ask him to run a marathon (he probably can do it, but it won't be very good).
Why is it then as investors we tend to treat all listed equities as roughly the same, only dividing them along rough lines of "growth or no growth", "cheap or expensive"?
Surely, just like shoes are intrinsically different, leading to different choices under different circumstances and for different purposes, the same also applies to listed equities?
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