Horizon Kinetics LLC, an investment management firm, published its fourth-quarter 2021 investor letter – a copy of which can be downloaded here. In the letter, the fund mentioned that the type of inflationary environment we are very likely to have is the change-of-era type, which might one day be looked back upon as the shift from a multi-decade disinflationary period to a massive inflationary and purchasing-power-debasement period. The fund also shared a remarkable statement about how the financial markets might distract, harm, or help and some ways to prepare, to benefit, rather than fall victim. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
Horizon Kinetics, in its Q4 2021 investor letter, mentioned Freeport-McMoRan Inc. (NYSE:FCX) and discussed its stance on the firm. Founded in 1987, Freeport-McMoRan Inc. (NYSE:FCX) is a Phoenix, Arizona-based mining company with a $70.5 billion market capitalization, and is currently spearheaded by its CEO, Richard Adkerson. Freeport-McMoRan Inc. (NYSE:FCX) delivered a 16.18% return since the beginning of the year, while its 12-month returns are up by 41.05%. The stock closed at $48.48 per share on April 07, 2022.
Here is what Horizon Kinetics has to say about Freeport-McMoRan Inc. (NYSE:FCX) in its Q4 2021 investor letter:
“Those were some ideas about copper demand. Here are some specifics about supply. Global copper mine production in the 10 years from 2005 to 2015 rose 2.45% annually. In the next 5 years, to 2020, it increased by only 0.9% annually. Even ignoring the 2020 pandemic year, for the 4 years from to 2019, the expansion rate was 1.66%. We already have the historical context for this: the commodity price collapse prior to 2015, from a position of excess capacity.
What producers must do in that situation, because they have high fixed costs and debt expense, is curtail their exploration and development expenditures and reduce operating costs. They rely on existing mines, instead, and on their highest-grade ores and lowest-cost production. They might not actually reduce current production, but they aren’t replacing the reserves that are being slowly drawn down. You can see this at work at the individual company level.
Freeport-McMoRan will illustrate. It is the world’s third-largest copper producer, closely following Chile’s Codelco and Australia’s BHP Group. In 2014, even though Freeport sold more copper than the prior year, its revenues dropped by over 25%, and it went from $4.8 billion of operating earnings (a 22% margin) to a $(0.2) billion loss. The company’s capital expenditures peaked in 2014 at $3.86 billion and will be about $1.72 billion in 2021, meaning the company is spending 55% less now than it was seven years ago. In inflation-adjusted terms, it’s spending 61% less today than seven years ago…” (Click here to see the full text)
Photo by Ricardo Gomez Angel on Unsplash
Our calculations show that Freeport-McMoRan Inc. (NYSE:FCX) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. Freeport-McMoRan Inc. (NYSE:FCX) was in 66 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 66 funds in the previous quarter. Freeport-McMoRan Inc. (NYSE:FCX) delivered a 19.62% return in the past 3 months.
In March 2022, we published an article that includes Freeport-McMoRan Inc. (NYSE:FCX) in the 5 Precious Metals Stocks to Buy According to Ken Fisher. You can find more than 100 investor letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.
Disclosure: None. This article is originally published at Insider Monkey.
