After a bit of wobbling around the opening, equities seem to be heading north, as the upward momentum is still strong ahead of the earnings season. However, several stocks are getting hammered today, most notably Transocean LTD (NYSE:RIG), Chesapeake Energy Corporation (NYSE:CHK) and Freeport-McMoRan Inc (NYSE:FCX). In this article we’ll discuss the news that triggered this avalanche and how is smart money positioned towards each stock.
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Back to the losers now. Freeport-McMoRan Inc (NYSE:FCX) stock is battered as investors are worried by the latest news coming out of Indonesia. The Indonesian government has announced plans to amend the rules regarding mining contract extension by the end of the year. Although the Freeport-McMoRan said it received assurances that its contract, which runs out in 2021, will be extended, it was not enough for investors, as the stock plummeted by as much as 6% during the first hours of trading. Freeport runs the Grasberg copper and gold mine, one of the country’s largest, and has been seeking assurances of a contract extension for the past two years. As the present rules allow negotiation to commence only two years before the end of the contract, this term is subject to revision and could be increased to 10 years.
Hedge fund legend Stanley Druckenmiller has high hopes for Freeport-McMoRan Inc (NYSE:FCX), which is among his top 10 stock pics. According to its latest 13F filing, Duquesne Capital holds 3.54 million shares, a position built throughout the second quarter. Recently, activist investor Carl Icahn also has initiated an 8.80% position that contains 100 million shares of the company and has obtained two seats on Freeport’s board (see details). The stock’s fan club has grown during the second quarter, with the number of funds holding stakes in Freeport-McMoRan having increased to 41, while the total value of their investments more than doubled to $581 million. Still, the holdings of the hedge funds from our database (excluding Icahn) accounted for only 3% of the company’s common stock at the end of June.
On the next page we’ll discuss two other stocks that are tanking following analyst reports.