Freeport-McMoRan Copper & Gold (FCX) has had some serious problems lately. A "horrific" tunnel accident in Indonesia shut down production and negatively affected revenue. And Q2 2013 earnings per share fell to 49 cents from 74 cents a year ago. The commodity market can be a risky business. But that news has suddenly shifted to the back burner due to numerous stories of recent insider buying at the company. Two members of the "Office of the Chairman" just bought 1.5 million shares worth over $42.8 million. According to the company website:
James R. Moffett serves as Chairman of the Board, Richard C. Adkerson serves as Vice Chairman, President and Chief Executive Officer of FCX and James C. Flores serves as Vice Chairman of FCX and Chief Executive Officer of Freeport-McMoRan Oil & Gas. Messrs. Moffett, Adkerson and Flores comprise FCX's Office of the Chairman.
FCX Chairman James Moffett bought one million shares with a price tag of over $28.5 million. And Vice Chairman James Flores purchased 500 thousand shares at a value of $14.32 million:
- Options Exercised
- Options Awarded
- Stock Gift
Transaction Details For Insider
|07/30||MOFFETT JAMES R||Purchases||$5.47 M||192,800||28.3746||4,066,880|
|07/29||MOFFETT JAMES R||Purchases||$23.06 M||807,200||28.5666||3,874,080|
|07/26||FLORES JAMES C||Purchases||$14.32 M||500,000||28.6445||886,041|
|07/26||WHARTON J TAYLOR||Options Exercised||$269.75 K||20,000||13.4875||86,856|
|07/26||WHARTON J TAYLOR||Options Exercised||$176.85 K||13,112||13.4875||99,968|
|07/26||WHARTON J TAYLOR||Sale||$269.41 K||9,416||28.6117||90,552|
|07/26||WHARTON J TAYLOR||Options Exercised||$0.00||20,000||--||--|
|07/26||WHARTON J TAYLOR||Options Exercised||$0.00||13,112||--||--|
|07/25||FORD GERALD J||Options Exercised||$269.75 K||20,000||13.4875||141,224|
|07/25||FORD GERALD J||Options Exercised||$176.85 K||13,112||13.4875||154,336|
When insiders at this level buy company stock it is always important to take note. Especially when they purchase such a large amount of shares. Most investors would agree that these two men probably think the company is undervalued by the market. According to Matt DiLallo FCX is planning to take advantage of the jump in oil prices and sell some of those valuable assets:
Freeport currently has about $20.5 billion in total debt, which it's planning to reduce to $12 billion over the next three years. To get there, the company decided that it needed to be a bit more aggressive, in light of the fact that two of the top commodities it produces, copper and gold, fell in price and reduced its earnings. The company's plan now is to cut about $1.9 billion in capital cost reductions and project deferrals, as well as look to sell some of its assets.
So should investors buy FCX based on this insider activity? Some analysts think that gold and other metals may rebound due to a slower than expected economic recovery. And many people are getting scared that the stock market has peaked and is due for a correction which will send metals higher. Although earnings are expected to be less for the rest of 2013, revenue at FCX may jump dramatically:
A lot depends on the company being able to rein in expenses, and capitalize on planned asset sales. Right now 14 out of 20 analysts polled recommend the stock as a buy or strong buy. And the price target ranges from a low of $23 to a high of $45. That offers a large upside from the close of $29.21 on Friday:
|No. of Brokers:||17|
There are risks involved when dealing with any stock, especially one that is involved in commodities. However we can not ignore the fact that two insiders just bought almost $43 million dollars worth of FCX. And its current P/E ratio is a very attractive 10.42, with a forward ratio of around 9. The company also pays a dividend with more than a 4% yield. If you want to get in on this stock, do it before the Bulls find out about it.