In our latest Dividend Digest The Value Bounce Editor Carl Delfeld recommends an international mining company
Freeport-McMoRan Copper & Gold, Inc. FCX is a world leader in the exploration of mineral resource properties. ... Reasons stock is trading at 2008 lows: Copper prices have fallen from highs in 2011—China consumes 40% of world copper production, concern over its economy slowing and high inventory levels have hit copper prices. A mining accident in Indonesia shut down production with estimates that 2013 production will likely come in about 20% below expectations. Freeport recently made two oil and gas exploration acquisitions worth $19 billion, shareholders did not appreciate that they were funded by Freeport issuing 91 million new shares. Reasons to expect FXC to Bounce: China stockpile levels are down significantly and copper prices have turned upward. The cost of copper production is at around $1 per pound, operating margins are at 30%, and ROE is 18.5%. Tunnel cave-in that killed 28 people led to two-month shutdown, last week company announced that mining operations are back up and running. Freeport’s CEO is buying 1 million shares of FCX. Stock down 18% in last three months, trading at lowest price since 2008, trading at seven times trailing earnings, offers current dividend yield of 4.6%. Oil and gas acquisitions offer upside growth and will give FXC welcome diversification with less dependence on copper prices going forward. Buy FXC at $29 or better with 15% trailing stop loss.”
Carl Delfeld, The Value Bounce, www.TheValueBounce.com, 7/10/13
