By Greg Feirman : Freeport McMoran Is Now Attractive with Emerging Value
About six months ago, I wrote a post arguing that copper giant Freeport McMoran (FCX) was overvalued ("Freeport Valuation Bloated Here," Top Gun FP, April 23, 2008). At the time, Freeport was trading at $118 a share and my call generated nothing but criticism.
On Tuesday, Freeport was down almost 65% to $42 a share, and I think there is value here.
As I predicted six months ago, copper prices are now down from $4 a pound in early July and yesterday, were around $2.50 a pound. That is really going to hurt its margins and cash flow. I’m not sure of the extent but it could be so bad that they are only a breakeven company with copper at these levels. We’ll find out more when the company reports 3Q earnings in a couple weeks.
But it doesn’t really matter. With 41 million ounces of proven and probable gold reserves, 93 billion pounds of proven and probable copper reserves and a market cap of $19 billion, you get the copper for $0.20 a pound and the gold for free! That’s an absolute steal.
This is just one example of a great company that has become a bargain during the recent selloff. I could do the same analysis for several others.
Disclosure: Top Gun is long shares of Freeport McMoran.
Related Posts :
- Kiener: Gold Prices To Double On Paper Market Default
- Gold Stock's Profit and Margin Charts
- Three Reasons Why Gold Will Move Higher
This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer on the bottom for more information.
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