najdorf

4 Unbelievable Stock Charts: Freeport-McMoran, Alcoa, Peabody and Goldman Sachs

You might be right about FCX having a comeback, but you're wrong that commodity prices don't matter. The company is completely levered to commodity prices. What is their book value constituted of? Inventory, property, plant & equipment, and goodwill (not much cash on hand). The inventory consists of commodities and commodity-derived products. The properties, plant and equipment are valuable for no reason other than that they produce commodities (remote Indonesia? desert in the American SW? Congo?). The goodwill is from acquisitions of other companies equally levered to commodity prices - what's this worth if they have to shut down the mines they acquired?

Come on. If your only business is selling copper, gold, moly, etc. and the price of those items declines, your earnings will decline. If they decline far enough you'll go bankrupt. What kind of liquidation of FCX's assets could you run in this climate? You really want to bet that there's anything left over for equity-holders if we don't see a commodity comeback? The only thing keeping FCX afloat is that they come across some gold while mining minimally profitable copper.