A Board Member’s Limited Partnerships Keep Buying Freeport-McMoRan Copper & Gold Inc. (FCX)

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Southern Copper Corp (NYSE:SCCO) is the closest peer for the company. As might be expected it is more dependent on copper than Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) is, and as prices have been weak it recorded a 15% decrease in revenue last quarter compared to the second quarter of 2012. This was attributed to lower copper prices as well as reduced production, somewhat offset by increased production of other metals. A number of costs increased and as a result Southern Copper’s earnings were down by about a third compared to the prior year period.

The stock trades at 14 times earnings, whether investors consider the company’s trailing results or analyst forecasts for 2014, and therefore is priced about even with Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) going by that company’s most recent quarterly results. Integration risk would be lower here, though investors would have to consider whether that is more or less a concern than a purer focus on copper (which is sensitive to macro conditions). Despite low leverage Southern Copper Corp (NYSE:SCCO)’s beta is 1.8.

Another peer for Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) is Newmont Mining Corp (NYSE:NEM), a $15 billion market cap miner with a focus on gold. Newmont is down over 30% in the last year, as gold prices have fallen and markets have hammered gold miners as a result. Revenue has also been down here, going by recent reports, and in fact adjusted earnings were negative in the second quarter of the year. Wall Street analysts believe the company will recover next year, and so Newmont is valued at 14 times forward earnings estimates, though of course this would likely be dependent on gold prices rallying from current levels.

Any of these miners would be risky buys, and none of them is cheap enough based on recent results- using Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX)’s Q2 rather than the full trailing twelve month numbers- to be a pure value stock. There are still three plausible long theses for the company- a lack of change in the dividend and therefore the maintenance of a high yield, improved margins from better integrating the oil and gas acquisitions, and the possibility of commodity prices recovering- though it’s understandable that investors might prefer to avoid buying the stock at this time on the basis of commodity risk.

Disclosure: I own no shares of any stocks mentioned in this article.

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