Freeport McMoran Copper & Gold (FCX)

Short or Buy? This has gone from mid-$50 to below $10. The recent rally to $12.57 may seem impressive, but looking at a 5-year chart, this is still in a major downtrend. Commodities have just finished a major cycle, and going by past history, it takes 3, 5, or even 7 years for big commodity cycles to recover and go back up. He would not hold this one.

This had a massive write off. In Canada, material stocks have not written off their balance sheets, and he doesn’t know why. His model price is $10.54, but he would wait for a pullback to around $4.

This is a materials company, mostly in copper and some in gold. The issue he has is its debt, and how much of an issue that puts them in if we start to see some failure on the commodity side.

This is a basket case and has been a disaster. They bought $20 billion of oil/gas assets right at the peak of the market. They levered up the balance sheet and the stock dropped 90% over a period of basically 4 years. Recently got re-permitted in Indonesia. Just sold off some of their copper assets. He could see this trading up around $10-$12 without much difficulty.

They have diversified out of just copper. He does not know where the bottom is for this stock.

He does not think the dividend is safe. It comes down to what you think is going to happen in China. He feels they will continue to slow.

It is amazing how this has fallen. The one lesson you are constantly taught in this business is that you have to think outside of the box. This is heavily leveraged to the commodity complex, particularly copper and gold. It is a fairly leveraged company, and for that reason free cash just disappears when commodity prices fall. He would prefer Rio Tinto (RIO-N) if he were to go into this area. It has a better profile from a balance sheet standpoint.

Copper prices have been very weak. Japan is the driver. He does not see an opportunity at the present time.

Found it very strange when they took the company, primarily a copper/gold producer, and decided to bet on oil which was at $110 a barrel. They levered up the company considerably from a position of no debt. He questions their judgment in the last couple of years. Feels the dividend is at risk and they still have a lot of debt.

There is going to be a recovery here. Copper is a continuing theme. Sees no problem with the story. It requires a multiyear horizon.

Copper mining. There is no rush to buy anything here. If you have a wide variety of stocks there is no reason to sell.

Looked at it fairly closely and the one worry was their debt. They would be sensitive to interest rate raises as well as any drop in the commodity prices. Prefers Rio Tinto. It could be a good switch.

Has had some tough times in terms of stock price over the years. They made a shift into the energy sector and now their focus has moved away from copper and gold. He prefers energy to materials.

(Market Call Minute.) He continues to be quite bearish on copper. Stocks are not performing well.

This has caused him a lot of grief on the cyclical nature of the “wait and see” information out of China. He has stepped aside from this. They are up and down, up and down, etc. If you are interested in Trading, now is a great time to buy.