1. Freeport-McMoRan Inc. (NYSE:FCX)
Number of Hedge Fund Investors in Q1 2024: 86
Freeport-McMoRan Inc. (NYSE:FCX) is a metals miner that focuses primarily on copper. Its Grasberg mine is one of the world’s biggest mines, which provides Freeport-McMoRan Inc. (NYSE:FCX) a great opportunity to capitalize on any growing demand. The site, coupled with others allows the firm to gain an early foothold in the market which is notorious for high set up costs and long lead times. These mean that Freeport-McMoRan Inc. (NYSE:FCX)’s potential customers might take years to reach profitability or production, allowing the firm to establish key industrial partnerships. At the same time, since the firm’s markets are tied to economic output, while high rates affect end demand, any potential cuts also carry the potential to inject fresh life into the shares. This was evident in July 2024 when the June payrolls report showed that the data for May was revised downward by 54,000 – bolstering the view for a Fed interest rate cuts. As a result, Freeport-McMoRan Inc. (NYSE:FCX)’s stock jumped by more than 1%.
As for its copper projects, here’s what Freeport-McMoRan Inc. (NYSE:FCX)’s management had to say during the Q1 2024 earnings call:
Moving to copper markets, starting on Slide 6, the growing intensity of use of copper in the global economy is supported by secular trends, particularly in electrification. Copper is a foundational, essential metal when it comes to electrification, and the world is becoming more and more focused on copper-intensive energy applications. New massive investment in the power grid, renewable generation, technology infrastructure and transportation are driving increased demand for copper and forecasts call for above-trend growth and demand for the foreseeable future.
This is occurring at a time when there are constraints on existing supplies, an absence of major new copper development projects and extended multiyear lead times for supply development, pointing to tight market conditions for an extended period of time. Copper producers, including us, at Freeport have been citing physical market tightness for some time. And in the last several weeks, the copper price has risen to reflect the reality of the market situation. Based on historical periods of above trend growth in demand, we may be in the early stages of a repricing for long-term copper prices. And we illustrate this on Slide 7, where we show how copper prices responded 20 years ago when China emerged as a major consumer of copper. You can see on this chart that within 12 months, the copper price increased by 40% and was up nearly four times within a three-year period.
During 2023, the secular drivers for copper demand provide a growth in demand despite weakness in some of the more cyclical drivers of copper demand. In the fourth quarter of last year, industry announcements of sizable supply disruptions tightened the market significantly. This is clearly evident when you look at the physical concentrate markets where smelters drop TC, treatment charges, sharply as a result of the shortage of concentrate supply. Notably, recent manufacturing data points also indicate that the global economy is recovering. Recently improved macroeconomic sentiment, combined with physical market conditions have driven prices higher, copper prices higher year-to-date, and many analysts are now projecting significantly higher copper prices in the future.
Even though FCX claims to have positioned itself to become a major beneficiary from the global push to electrification, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than FCX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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