An Insider Put Half A Million On Freeport-McMoRan’s Move Into Oil

Page 1 of 2

Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) stunned its investors last December when it announced that it would buy two related energy companies- including Mcmoran Exploration Co (NYSE:MMR) which had some time ago been part of the same business as Freeport- and therefore expand its commodities business to include oil and gas. Many market watchers had treasured Freeport-McMoRan as a barometer of copper demand and therefore of global macro activity in general and China in particular. In addition, M&A activity often destroys shareholder value, and in this particular case the transaction price for the acquired companies seemed particularly high. The stock dropped about 20% and- despite a rally- is still down about 15% from its levels before the deal was announced.

Now a Form 4 filed with the SEC has disclosed that advisory Director J. Bennett Johnston (a former U.S. Senator from Louisiana) directly purchased 16,000 shares of the stock on March 1st at an average price of $31.48 per share. The stock currently trades at about $33. We track insider purchases because it generally doesn’t make sense for insiders to purchase more stock in the company (reducing their diversification) unless they have particularly high confidence; studies show that stocks bought by insiders have a small outperformance effect (read more about studies on insider trading).

Freeport-McMoRan Copper & Gold Inc.’s business as it currently is seems to be performing adequately. Last quarter revenue was up and margins expanded, contributing to a 16% increase in net income. The stock currently trades at 10 times trailing earnings, with a dividend yield of about 4%, which would arguably qualify it for value status. Of course, the copper business means that Freeport-McMoRan’s stock price is highly sensitive to the broader economy (the stock’s beta is 2.2). The forward P/E, based on analyst consensus for 2014, is only 7.

largest hedge funds in the world

13F filings show that a number of hedge funds bought into Freeport-McMoRan Copper & Gold Inc. in the fourth quarter, possibly after its stock price plunged. We track these filings in part to help develop investment strategies (for example, we have found that the most popular small cap stocks among hedge funds generate an excess return of 18 percentage points per year) and also to monitor how individual stocks are being traded (as well as how individual hedge funds are behaving. Billionaire John Paulson’s Paulson & Co. initiated a position of 9 million shares (see Paulson’s stock picks) and Omega Advisors, a hedge fund managed by billionaire Leon Cooperman, bought over 3 million shares of the stock (find Cooperman’s favorite stocks). Cooperman has in fact claimed that the acquisition will be good for the company.

It turns out that the stock is now trading at a discount to its peers in terms of earnings:

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!