Freeport-McMoRan Inc (NYSE:FCX)
The current market conditions have made finding a strong investment more challenging. However, any time markets are uncertain, there are always opportunities. I've been digging around and one of the opportunities I've found is Freeport-McMoRan. At the end of the day, the company is in the right market at the right time. Today, we'll talk about why FCX is likely to skyrocket moving forward.
Copper Will Send FCX Skyrocketing
To understand what direction a stock is likely headed in, it's important to understand what the company the stock represents does. When it comes to Freeport-McMoRan, the company is in the business of mining basic materials. The flagship product from the company is copper. In fact, the metal makes up over 60% of the company's total revenue. This is a key fact to consider when trading or investing in the stock.
Knowing that FCX largely depends on copper, we now know where to look when determining where the price of the stock is headed. At the moment copper is a great product. Let's face it, it's a hot commodity. In fact, there are three reasons why copper is likely headed up, and when this happens, FCX will realize larger profits on the commodity.
Reason #1: Renewable Energy
The first reason that I'm expecting to see big gains in the price of copper, and, therefore, Freeport-McMoRan stock, is the global view on energy. In the past, burning fossil fuels seemed like the best way to go. After all, the action was highly productive. So, entire nations did so for years and years.
However, over time we've seen how the burning of fossil fuels harms the environment. As a result, we're seeing a global shift toward renewable energy. These days we're seeing increased demand for solar, wind, and hydro-power. We're even seeing entire solar and wind power farms being constructed around the world. Believe it nor not this is great for FCX.
At the end of the day, if you're going to build anything that has to do with the cultivation and transfer of energy, you're going to need copper - a lot of it! With so much going on in the energy sector around the world, we're seeing ever-increasing demand for the metal. As the law of supply and demand tells us, this must send the price of copper upward. So, due to this shift in the energy sector, copper prices will likely continue to rise, increasing profits for FCX.
Reason #2: Asian Interest Rate Expectations Could Support Further Growth
China is the world's second largest economy and largest consumer of basic materials. With that said, if you plan on trading Freeport-McMoRan, it's going to be important to watch economic conditions in the region. Most recently, investors have started to expect that the People's Bank of China will reduce its interest rate. As a result, risk appetites among investors in the region will grow. This will likely lead to higher metals prices in the country that consumes the most copper. So naturally, this should send the price of the metal upward.
In a statement, Mitchell Hugers, Commodities Strategist at BMI Research, had the following to offer:
“Easing rates will likely support metals prices in the short term as it will boost risk appetite for investors...”
Reason #3: Weakening USD
For some time, the US dollar was seeing massive gains against other currencies. However, throughout the year 2016, we've seen something very different. The value of the currency has seen declines. Because copper is priced using the USD, this will generally lead to gains, which in turn will help FCX.
Because copper is priced using the USD, when the value of the currency rises, it makes the metal more expensive in nations outside of the United States. However, when the USD falls, copper becomes less expensive around the world. Because of this, the metal becomes more accessible, increasing demand. This sends the price of the metal upward. At the end of the day, as the USD declines in value, profits realized at FCX will climb.