With the market relatively quiet in afternoon trading, shares of Freeport-McMoRan Inc (NYSE:FCX) and Republic Airways Holdings Inc. (NASDAQ:RJET) are up by 1.8% and 9.2% respectively. Freeport-McMoRan Inc (NYSE:FCX) is rallying because copper futures are up modestly and crude prices are up 2%, while Republic Airways Holdings is advancing because the airline announced it reached a tentative agreement with its airplane pilots over a new three-year labor contract. Let’s take a closer look at the two stocks and see if the smart money agrees with today’s sentiment.
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Carl Icahn, who is a major shareholder with a recently established stake of 88 million shares, wants Freeport-McMoRan Inc (NYSE:FCX) to cut capital expenditures, trim executive pay, and discontinue high-cost production. While Freeport-McMoRan management has already cut capital expenditures substantially, they may cut expenses further. Any cost cuts would help Freeport-McMoRan’s liquidity and allow the company to ride out the commodity storm. The company recently raised $1 billion from an at-the-market secondary offering and may raise an additional $1 billion from another offering. With the rally today, investors are hoping Freeport-McMoRan’s liquidity will be enough to last it through the downturn and that Icahn can unlock value for the company’s beleaguered shareholders who have seen the price of their shares fall by 60% year to date, as a weak Chinese economy weighs on copper and crude prices.
Hedge funds like Freeport-McMoRan as 41 of the funds we track owned $581.83 million of the company’s shares (representing 3.00% of the float) on June 30, up from 31 funds and $258.1 million respectively on March 31. Stanley Druckenmiller‘s Duquesne Capital established a new position of 3.55 million shares, while David Shaw’s D.E.Shaw increased its stake by 248% to 3.07 million shares. Moreover, Mario Gabelli’s GAMCO investors raised its stake by 13% to 2.73 million shares, while Ken Griffin’s Citadel Investment Group upped its position by 19% to 2.73 million shares. Brian Riano, John Eckerson, Sean Fahey and Albert Marino’s Claren Road Asset Management established a new stake of 1.65 million shares as well.
Like hedge funds, analysts are bullish on the stock. Currently, 11 analysts have ‘Buy’ ratings, 10 have ‘Hold’ ratings, and two have ‘Sell’ ratings. Among them, RBC Capital has a ‘Sector Perform’ rating with a $14 price target, while Macquarie has a ‘Buy’ rating with a $18 price target. Overall, analysts have a consensus price target of $19.70 per share, giving Freeport-McMoRan a premium of over 117%.
Analysts at UBS think the tentative labor agreement will improve Republic Airways Holdings Inc. (NASDAQ:RJET)‘s profits and increase the stock’s valuation. They upgraded Republic Airways’ stock to ‘Buy’ from ‘Hold’ and raised their target price to $8 from $5 on the back of the development. Republic Airways Holdings shares were down 63% year-to-date before the upgrade.
Hedge funds are divided on Republic Airways Holdings Inc. (NASDAQ:RJET). A total of 18 hedge funds owned $137.57 million of the company’s shares (representing 29.50% of the float) at the end of June, versus 15 funds and $183.4 million respectively on March 31. More specifically, Ross Margolies‘ Stelliam Investment Management increased its holding by 6% during the second quarter to 5.01 million shares while Stephen V. Raneri’s Lioneye Capital Management raised its stake by 35% to 2.06 million shares. Jim Simons’ Renaissance Technologies upped its stake by 21% to 729,723 shares, while Richard Haydon’s Yield Capital Management kept its holding unchanged at 762,000 shares. Going the opposite way is Jay Petschek and Steven Major’s Corsair Capital Management, which edged down its stake by 1% to 4.65 million shares.