Freeport Underperforms Alcoa Despite Copper Outperforming Aluminum

Apr. 8.12 | About: Freeport-McMoRan Inc. (FCX)

Shares of copper miner Freeport McMoRan (FCX) are down 4.5% so far in 2012. Comparably, shares of aluminum producer Alcoa (AA) are up 4.1% so far in 2012. FCX's underperformence of AA is notable because copper has outperformed aluminum so far in 2012.

The underpermormance of FCX relative to AA during a period when copper prices have been stronger than aluminum prices presents investors the opportunity to move out of the lower quality AA and into the higher quality FCX.


FCX pays a annual dividend of 3.31%, this compares favorably to AA's dividend of 1.25%.


AA has $7.43 billion in net debt, while FCX has no net debt. This is even more impressive because FCX is a much larger company than AA. FCX has a market cap of $35 billion where as AA has a market cap of $10 billion.


Investors should consider using the divergence between AA and FCX, relative to aluminum and copper prices, to swap out of AA and into FCX.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.