We recently compiled a list of the 8 Best Copper Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where Freeport-McMoRan Inc. (NYSE:FCX) stands against the other copper stocks.
Overview of the Copper Supply and Demand
Copper is recognized as a critical metal due to its extensive applications, particularly in electrical wiring and renewable energy infrastructure. Prices of copper reached a record high during the first half of 2024, selling at $5.11 per pound on May 21, 2024. However, the price dropped slightly during the third quarter but remained elevated to its historic rates from the past two years.
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At the start of Q3, copper was priced at $4.42 per pound. It peaked at $4.65 on July 5 but then declined to a low of $3.95 by August 7. The third quarter ended with prices recovering to $4.50 on September 30.
There are several factors affecting the prices of copper. Firstly, the demand for this metal remains high, largely driven by sectors related to the energy transition, including renewable energy and electric vehicles (EVs). However, this demand coincides with a slowdown in the Chinese real estate sector, which is traditionally a major consumer of refined copper. Regardless of the challenges in the real estate market in China, the global demand for copper saw a slight increase of 2.5% in the first half of 2024. The growth was driven by notable demand from China of around 2.7% while other regions also witnessed demand growth of around 2%.
However, despite high consumption, the supply side outpaced the demand. According to a report by the International Copper Study Group (ICSG), there was a surplus of 535,000 metric tons (MT) through the first eight months of 2024. The global copper mine production remained elevated, increasing by 2% to reach 14.86 million MT from January to August 2024. Chile’s Escondida and Collahuasi mines remained key contributors while operations in the Democratic Republic of Congo and Indonesia reported 11% and 22% production growth, respectively. In addition to raw copper refined metal production also witnessed a 5% increase driven by expansion in China and the launching of new facilities in the Democratic Republic of Congo.
According to a report by Investing News Network, analysts believe that the primary reason behind higher prices during the first half of 2024 was not the fundamental supply-demand play, but was led by speculative investment. Analysts back this sentiment on the assumption that market participants would have taken a cautious approach following substantial gains in Q2 resulting in fluctuating prices of copper.
Looking ahead, the ongoing struggles in China’s real estate sector have dampened overall demand for copper. The government’s efforts to stimulate the market through various initiatives to boost housing projects are expected to revive global demand further. Moreover, energy transition efforts also continue to fuel demand for copper, the International Energy Forum estimates that approximately 1.1 new mines will need to come online annually until 2050 just to maintain current demand levels.
Our Methodology
To compile the list of the 8 best copper stocks to buy according to hedge funds, we used the Finviz stock screener and our previous articles. Using the two sources we curated an aggregated list of copper stocks sorted by market capitalization. Next, we ranked these companies based on the number of hedge fund holders as of Q3 2024, sourced from Insider Monkey’s database. The list is ranked in ascending order of the number of hedge funds.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A large open-pit copper mine with heavy machinery extracting minerals from the earth.
Freeport-McMoRan Inc. (NYSE:FCX)
Number of Hedge Fund Holders: 74
Freeport-McMoRan Inc. (NYSE:FCX) is the best copper stock to buy according to hedge funds. It is a major international mining company based in Phoenix, Arizona. It primarily focuses on extracting and producing copper, gold, and molybdenum, which are essential metals used in various industries. Some of the significant mines owned by the company include Grasberg in Indonesia, which is one of the largest copper and gold deposits globally, Morenci, and Cerro Verde.
Two main factors make Freeport-McMoRan Inc. (NYSE:FCX) an attractive investment opportunity. Firstly, its leaching technology is a critical differentiating factor that enables the company to enhance copper production from low-grade ores and previously unrecoverable materials. During the first nine months of 2024, the incremental copper production from its leach initiative was nearly 70% higher than the comparable period last year. This technology stands out as it allows the company to produce substantial amounts of copper without investing in new mining sites. Management estimates that the technology requires an investment of less than $1 billion, which is considerably less than the multibillion-dollar capital investment that a mining expansion project takes.
Secondly, the company has strategically positioned itself to benefit from secular demand trends for copper driven by electrification. During the third quarter of fiscal 2024, Freeport-McMoRan Inc. (NYSE:FCX) reported robust demand from the United States and China as well despite its weak property sector. As a result, its copper sales for the quarter came in 2% above the guidance taking its adjusted EBITDA to $2.7 billion.
Overall FCX ranks 1st on our list of the best copper stocks to buy according to hedge funds. While we acknowledge the potential of FCX as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. 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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Disclosure: None. This article is originally published at Insider Monkey.
