Freeport-McMoRan Copper & Gold Inc. (FCX), And Why Diversification Is Crucial

The big news for Rio Tinto plc (ADR) (NYSE:RIO) of late has been substantial write downs of its assets. This includes the $14.4 billion write down in 2012; $3.4 billion for Rio Tinto Coal Mozambique and $11.0 billion for the company’s aluminum assets.

For 2012, on a year-over-year basis, Rio experienced significant declines in its revenue due to the downward movement in the prices for iron ore, pellets and nickel. Rio Tinto plc (ADR) (NYSE:RIO)’s year-over-year decline was 16%. However, unlike Vale’s annualized negative 3% five-year expected EPS growth, analysts expect Rio to grow EPS at a rate of 16.8% annually.

Billionaire Ken Fisher is the top hedge fund owner by shares in both Rio Tinto plc (ADR) (NYSE:RIO) and Vale. However, beyond Fisher, the hedge fund interest in both of these stocks is minimal.

By the numbers

Compared to the other major miners, Freeport trades on the low end of the industry:

What’s also encouraging about Freeport is its relatively strong balance sheet.

Don’t be fooled

The move by Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) is a big positive, with the company moving away from gold and copper and into the energy markets. The deal should diversify Freeport, as well as offer new growth opportunities. Thus, the recent sell-off due to falling gold prices might be overblown, where gold accounts for less than 10% of revenue. Freeport also offers investors a robust 4.5% dividend yield.

The article Why Diversifying Is Key for This Copper Play originally appeared on Fool.com.

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