Freeport McMoran Copper & Gold (FCX)

An outstanding, well run company and a better investment over the long haul than TCK.B-T. Copper is a big part of FCX and he does not know if they can continue to pay the dividend if copper prices go lower. He wasn’t crazy about their previous acquisitions.

Made some big moves into energy recently, which is disappointing to most institutional investors. In any case, it is still the biggest producer of copper with good exposure to gold. Not expensive. Not his preferred holding in copper anymore.

Their announcement in December of entry into the energy business kind of put investors into a sour mood. Stock hasn’t done so well. Has always been a pure play in the copper space and now we have to contend as to whether they are energy or copper and how this acquisition will affect them. Would prefer Teck Resources (TCK.B-T) which he has been buying.

Last year was a very bad year for them because 1) the whole commodity complex suffered quite a bit and 2) because of some labour disruptions in Asia at one of their major operations. Because of this, their earnings were quite poor. A pure commodity play and he would look for other ways to play a world expansion other than through a pure gold/copper operator. There are operational risks.

Basic materials sector is having some money rotate into it. It’s the beginning of a new year where there is optimism and hope that the economy is going to heat up a little bit and maybe commodity prices have a bit of a lift. At this point there is not enough evidence to make a big allocation. This company is in the process of going through a change in the investor base.

Just made a huge acquisition in energy. People were upset because they viewed this company as a metals play, not an energy play. Terrific world scale company. Not the one he would buy right now. Situation is a little clouded with the acquisition.

Major businesses are copper and gold. Producers have struggled compared to the commodity. A lot has to do with operating risk and we have seen a lot of these companies stumble. He would be light on this one.

Largest gold/copper mine in the world (Indonesia). Maybe their acquisition of Plains, putting them back in oil/gas, is a good move, but that’s not what investors want. Almost 4% dividend but will that be sustainable when they have spent $9 billion on acquisitions? You also should have some questions about the long-term strategic direction for the management. Suspects there will be a phenominal selling of the stock by people who wanted the purer play in gold/copper.Largest gold/copper mine in the world (Indonesia). Maybe their acquisition of Plains, putting them back in oil/gas, is a good move, but that’s not what investors want. Almost 4% dividend but will that be sustainable when they have spent $9 billion on acquisitions? You also should have some questions about the long-term strategic direction for the management. Suspects there will be a phenominal selling of the stock by people who wanted the purer play in gold/copper.

Just announced they are acquiring Plains and McMoran for $9 billion so are getting deep into oil now. Whenever a company like this dilutes their product offering or their focus, it can be very good or sometimes a challenge. Market is treating this as a challenge but he doesn’t know that he would jump to that conclusion. Well managed. Don’t expect they would get into an endeavour like this without having done thorough research.

[Show did not air however top and past picks were posted to web site] (Top Pick Nov 3/11, Down 2.41% total return)

Thinks that copper prices will continue to be relatively weak. As time goes by and the economy is strengthening and there are solid economic numbers, this type of stock should do well.

Gold/copper producer. One of the reasons that the Fed and central banks globally are keeping rates low is to try to bolster asset and commodity prices and growth. You would think this would play into a copper and gold producer. On the other side of that is the weakening of the macro picture which is sort of depressing these companies. In the short-term, don’t expect too much. Longer-term it is going to be good for companies like this. He would tend to stay away from the whole sector.

Once we get this growth scare, that he thinks we are going to have, this is a name that if you can get it in the mid-$30’s or better, he would definitely be a buyer. Good balance sheet, good dividend, good management and lots of resources. On his watch list.

Positive is that they have gold stream coming through it. Each rally has less and less legs. No positive guidance on this quarter in this group. It`s a bottom fishing play based on QE3.

When you look at copper broadly, there are only 2 weeks of demand covered globally. It has the tightest fundamentals of any metal. Over 3% dividend yield. The cheapest stock in the large-cap materials universe. Really inexpensive. Has upside to copper prices, yield support, good growth and feels copper is the best place to be.