Precious metals, including gold and silver, saw their prices skyrocket in the past year, but this did not help metal stocks much. This is especially true for the industry giants with considerable exposure to copper. The industry is currently dealing with overproduction, and reports suggest that the trend is likely to continue.
Consequently, metal prices are expected to remain under pressure. However, despite these concerns, there are hidden gems which are capable of providing good returns. I have picked the two stocks based on their long-term prospects. Both of the companies offer healthy dividends and are thus good for income portfolios. Let’s have a look at these stocks.
Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX): With market capitalization of more than $30 billion, Freeport-McMoRan Copper & Gold is one of the most prominent names in its sector. The stock’s current dividend yield stands at 3.9%. Though it lost 2.6% of its value in the past 12 months, the company is firmly back on track.
Improved labor relationship
The copper-mining company recently solved its labor issues after a month-long strike. Despite the temporary snag in production, the company is not expected to suffer any long-term adverse impacts.
Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) is not the only company dealing with labor issues. Earlier this year, its competitor Southern Copper signed a three-year labor contract in Peru, in which the company agreed to provide a 6.5% wage increase to its Peruvian labor force in the first year. This will be followed by an 5% annual increase in the subsequent years.
Growth through acquisitions
Despite the rather subdued performance of its stock in the recent past, the company expects to boost its profile through a series of acquisitions. It is already committed to a $7 billion purchase of Plains Exploration & Production. The acquisition will help Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) to expand its presence in upstream gas and oil business and reduce its dependence on its core gold and copper business.
The company is further planning to augment its gas and oil business with the acquisition of Mcmoran Exploration Co (NYSE:MMR). While copper prices are expected to remain depressed in the near future, Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) will be able to weather the tide with its well-diversified business.
Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX)’s stock is currently trading nearer to its 52-week low after a deep correction in April. Its first-quarter net income for FY 2013 also dipped 15% in comparison to the first quarter of the previous year.
However, the company also has solid balance sheet with negligible debt. It is operationally and geographically diversified and thus is in good position to withstand usual business bumps. I expect the synergies from its acquisitions to push the stock price further up.
Rio Tinto plc (ADR) (NYSE:RIO) is also a very well diversified company. The stock price has corrected considerably in the recent past following industry-wide concerns, and now presents a good buying opportunity.