They Call Alabama the Crimson Tide…

Written by GSCR Staff   
Thursday, 09 October 2014 06:31

…Call me Deacon Blues. The reference to the Steely Dan song is extremely dated but brings home the point.

The college football world was turned topsy turvey this past weekend as some perennial losers like Ole Miss and Mississippi State won big and the dynasty, Alabama, lost. Is this coincidence with what appears to be a market correction or bear market?   Are the losers turning to winners? We digress…

 

One observation we made in Monday’s Goldman Guide was that multinational companies have increased savings over the last few months as the U.S. dollar appreciates against foreign currencies. This phenomenon, in what is effectively a currency trade, could be a sign of the early stages of an economic recovery. The time may be right to dip your toes into the possibility of an economic upturn. What is a good avenue for this?

 

Copper prices are an outstanding metric for economic activity. Copper is used in just about everything from housing to computers. An increase in demand, hence an increase in price, is usually an indicator of surging economic activity. Copper, the commodity, is down over 6% this year, and has bounced between $3 to $4 per pound over the last three years. A breakthrough to the $4 level and beyond could be good news for copper miners.

 

Freeport-McMoRan, Inc. (NYSE – FCX - $32.30) is the second largest copper miner in the world. The Company also does other minerals along with oil and gas, but copper is the firms’ bread and butter. Below is the 3-year chart for the stock.

 

3-Year Chart for FCX

(Source: Yahoo! Finance)

 

MM.10.09.14 3yr-fcx

 

 

 

On the technical side, the stock appears to have approached another dip in what has been an approximate head and shoulders pattern over the last three years. The simple valuation checks out as the forward P/E of 11 is below the trailing metric of 13, and the 5-year PEG is a low 0.3. Additionally, the firm has maintained a healthy 25% operating margin over the past four quarters.

 

Is the economy finally turning around? That’s a $1 million question. Buying a little FCX or some long calls could be a way to get in on what could be a turn around as the losers become winners. The stock could end the year close to the $40 level.

 

Have a great day!

 

Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.

Disclaimer:

This Market Monitor blog was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces research via two formats: Goldman Select Research, which typically highlights small cap companies, and Goldman Opportunity Research, which features micro cap companies in a sponsored research format. Thus, the Select product reflects the Firm’s internally generated stock ideas while the Opportunity product reflects sponsored research reports. 

Goldman Small Cap Research is not affiliated in any way with Goldman Sachs & Co.

It is important to note that while we may track performance separately, we utilize the same coverage criteria in determining coverage of all stocks in both research formats. Please view the company’s individual disclosures for each engagement, which can be found in each company-specific report. All information contained in this blog, newsletter and in our reports were provided by the Companies or generated from our own due diligence. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence. Analysts are compensated on a per report basis and not on the basis of his/her recommendations. 

The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Goldman Small Cap Research did not make an independent investigation or inquiry as to the accuracy of any information provided by the Company, or other firms. Goldman Small Cap Research relied solely upon information provided by the Company through its filings, press releases, presentations, and through its own internal due diligence for accuracy and completeness. Such information and the opinions expressed are subject to change without notice. A Goldman Small Cap Research blog, report, note, or newsletter is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed.

This blog does not take into account the investment objectives, financial situation, or particular needs of any particular person. This blog does not provide all information material to an investor’s decision about whether or not to make any investment. Any discussion of risks in this presentation is not a disclosure of all risks or a complete discussion of the risks mentioned. Neither Goldman Small Cap Research, nor its parent, is registered as a securities broker-dealer or an investment adviser with FINRA or with any state securities regulatory authority.

ALL INFORMATION IN THIS BLOG, REPORT OR NEWSLETTER IS PROVIDED “AS IS” WITHOUT WARRANTIES, EXPRESSED OR IMPLIED, OR REPRESENTATIONS OF ANY KIND. TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE FOR THE QUALITY, ACCURACY, COMPLETENESS, RELIABILITY OR TIMELINESS OF THIS   INFORMATION, OR FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF THIS INFORMATION BY YOU OR ANYONE ELSE (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES, TRADING LOSSES, AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THIS INFORMATION). TO THE FULLEST EXTENT PERMITTED BY LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE TO YOU OR ANYONE ELSE UNDER ANY TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY, PRODUCTS LIABILITY, OR OTHER THEORY WITH RESPECT TO THIS PRESENTATION OF INFORMATION.

 

Add comment
  • No comments found