Yesterday's announcements came just after my buy limit order was executed. After reading the company's announcement that it was immediately suspending its dividend and sharply curtailing its mining operations, I knew exactly what I must do.
I've learned the hard way that when you've purchased shares of a company, and the reason that you made the purchase changes, it's time to sell, sell, sell!
I was fortunate. My buy limit order was executed at $17.80 and I was able to sell my shares of Freeport-McMoRan Copper & Gold (FCX) at $17.50. For me the sale was based on my investment disciplines and I had no choice.
"We are responding aggressively to the current market conditions, which have weakened dramatically in recent weeks," Chairman James Moffett and Chief Executive Richard Adkerson said in a joint statement.
"The suspension of our dividend reflects the sharp and rapid decline in copper and molybdenum prices, the dislocation of capital markets and the uncertain economic outlook," they said.
Sounds like FCX had no choice either. The stock price chart as of Tuesday reflects most of what its industry has suffered over the past year. It's just plain ugly:
Now I'll be starting my research all over again looking for the next best investment in the copper and molybdenum sector, and I don't think it will be easy.
The long-term outlook might be brighter than I realize and the company's comments on that topic seemed promising and upbeat.
Freeport's moves on capex and the dividend will position the company to take advantage of an expected global economic turnaround which would once again send metal prices soaring, Adkerson said.
"We see a long-term positive market for copper." But most of us don't know what "long-term" means. Is it a year or is it ten years?
When companies like FCX suspend their dividends and drastically change their business plans, investors have to regroup and reconsider.
The time to reinvest in FCX, unless you are a true speculator, is after the trend of higher copper prices resumes and they are able to restore some sort of dividend.
In the meantime. I'd much rather buy companies like Kinross Gold (KGC) on pullbacks below $9 a share or BHP Billiton (BHP) on corrections below $25.
Another consolation prize would be to be able to pick up shares of Foster Wheeler (FWLT) if it falls back to $14 again or NYSE Euronext (NYX) should it go "on sale" again back down around the $18 level.
No matter what the sector or industry, I'm looking for value from companies with lots of cash, little debt, outstanding management and a game plan that will survive a long, harsh recession.
Do us all a favor and leave your favorite candidates and "wish list" in the comments sections below. I'll choose the best ones for some future articles.
Disclosure: Long KGC.
