3. Freeport-McMoRan Inc. (NYSE:FCX)
Number of Hedge Fund Holders: 68
Freeport-McMoRan Inc. (NYSE:FCX) is an Arizona-based minerals and mining firm. The company mines and produces copper, a metal used extensively in the manufacture of electric vehicles. It also has interests in other materials used in EVs, like cobalt and lithium mining. These materials are used in the manufacture of EV batteries. The copper marketed by the firm is used in transmission lines for electricity, coils for electric motors, and battery components. All are used in EVs.
On July 22, RBC Capital analyst Sam Crittenden maintained a Sector Perform rating on Freeport-McMoRan Inc. (NYSE:FCX) stock and lowered the price target to $35 from $46, noting that a slowdown in demand was going to weigh on the shares in the near-term.
At the end of the first quarter of 2022, 68 hedge funds in the database of Insider Monkey held stakes worth $4.1 billion in Freeport-McMoRan Inc. (NYSE: FCX), compared to 66 in the preceding quarter worth $3.7 billion.
In its Q4 2021 investor letter, Horizon Kinetics LLC, an asset management firm, highlighted a few stocks and Freeport-McMoRan Inc. (NYSE:FCX) was one of them. Here is what the fund said:
“Those were some ideas about copper demand. Here are some specifics about supply. Global copper mine production in the 10 years from 2005 to 2015 rose 2.45% annually. In the next 5 years, to 2020, it increased by only 0.9% annually. Even ignoring the 2020 pandemic year, for the 4 years from to 2019, the expansion rate was 1.66%. We already have the historical context for this: the commodity price collapse prior to 2015, from a position of excess capacity.
What producers must do in that situation, because they have high fixed costs and debt expense, is curtail their exploration and development expenditures and reduce operating costs. They rely on existing mines, instead, and on their highest-grade ores and lowest-cost production. They might not actually reduce current production, but they aren’t replacing the reserves that are being slowly drawn down. You can see this at work at the individual company level.
Freeport-McMoRan Inc. (NYSE:FCX) will illustrate. It is the world’s third-largest copper producer, closely following Chile’s Codelco and Australia’s BHP Group. In 2014, even though Freeport sold more copper than the prior year, its revenues dropped by over 25%, and it went from $4.8 billion of operating earnings (a 22% margin) to a $(0.2) billion loss. The company’s capital expenditures peaked in 2014 at $3.86 billion and will be about $1.72 billion in 2021, meaning the company is spending 55% less now than it was seven years ago. In inflation-adjusted terms, it’s spending 61% less today than seven years ago…” (Click here to see the full text)
