Update FCX
Long Only, Growth At A Reasonable Price, Long/Short Equity
Seeking Alpha Analyst Since 2021
Freeport-McMoRan Copper & Gold (NYSE: FCX)
Originally recommended on Feb. 15/10 (IWB #20107) at $36.84 (split-adjusted). Trading Thursday at $49.25. (All prices in U.S. dollars.)
FCX is a large mining company based in Phoenix, Arizona. It is the biggest publicly-traded copper company but also has significant assets in molybdenum (it's the world's number one producer) and gold. The company has over 29,000 employees worldwide with U.S. mines in Arizona, New Mexico, and Colorado. Overseas, it controls or has an interest in copper mines in Peru, Chile, Indonesia, and in the Democratic Republic of Congo. Putting it all together, the company owns a nice combination of assets in secure locations along with a few that are more problematic.
The stock split 2-for-1 on Feb. 1 and we have adjusted the original recommended price accordingly. Since then it has mostly traded sideways and is currently 20% below its 52-week high of $61.35 when adjusted for the split. At that price, the company trades at a very modest p/e ratio of 9.6 and is showing a yield of about 2%.
The company released its first-quarter results recently and the net income attributable to common stock was $1.5 billion ($1.57 per share) which compares favorably to $897 million ($1 per share) for the first quarter of 2010. Consolidated sales from mines for the quarter totaled 926 million pounds of copper, 480 thousand ounces of gold and 20 million pounds of molybdenum. Copper sales were down from 960 million pounds in the same period last year but gold and molybdenum sales were slightly higher.
FCX is rewarding investors by paying a supplemental dividend of $0.50 a share on June 1. This is in addition to the regular quarterly dividend of $0.25 a share. "This action reflects our established financial policy of maintaining a strong balance sheet, prioritizing uses of cash to future growth and returning excess cash to shareholders," chairman James Moffett and CEO Richard Adkerson said in a statement. "Our recent financial performance, strong balance sheet, and the positive market environment for our products enables us to invest aggressively in our attractive portfolio of growth projects while providing strong cash returns to shareholders."
This is a great company to own at these prices. Buy if you don't own it, buy more if you do.
Action now: Buy with a target of $65.
Disclosure: I am long FCX.
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