An Insider Likes The New Freeport-McMoRan Copper & Gold Inc. (FCX)

Peers for Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) include Newmont Mining Corp (NYSE:NEM) and Southern Copper Corp (NYSE:SCCO). Newmont is primarily a gold miner (though it does also produce copper) and recent results reflect the poor conditions of the gold market at this time: revenue dropped 19% last quarter compared to the first quarter of 2012, while earnings fell 36%. It too has a high dividend yield (4.1%) with earnings multiples in the 10-11 range, so it may have overreacted to recent bad news. Revenue and earnings were also down at double-digit rates over the same period at Southern Copper, though the decline was shallower. The stock carries trailing and forward P/Es of 14 and 13, respectively, so the market expects a recovery at the business going forward.

We can also compare Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) to macro-dependent companies such as Cliffs Natural Resources (NYSE:CLF) and Vale (NYSE:VALE), producers of industrial minerals. Cliffs has seen its stock price fall over 60% in the last year, as the iron ore company has reported net losses on a trailing basis. Wall Street analysts are bullish, with the target stock price being over 30% higher than current levels, but we think that we’d have to see better results from Cliffs. Vale trades at 16 times trailing earnings, but the sell-side is very optimistic about earnings here: the forward P/E, based on projections for 2014, is only 6 with the stock’s five-year PEG ratio being well below 1. Revenue has actually been up, though reduced margins caused net income to fall in Q1 2013 versus a year earlier.

Still, we would be wary of these peers- Cliffs and Newmont in particular, going by recent results. The large insider purchase at Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) is certainly worth noticing, and while we aren’t fans of its acquisition it is possible that inefficiencies related to the diversification away from copper and gold has already been reflected in the stock price. With attributes such as a high yield we’d be interested in researching the company further.

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