Freeport McMoRan Defines Its Cyclical Trough
Our bottom of the cycle theme is playing out globally. In a late 1990s style market (the model for current resource sector equity market conditions), net outcomes will remain flat but trading opportunities around the mean will persist. Freeport McMoRan, the world’s largest listed copper producer, is two thirds below its peak 2011 price. Since the end of 2014, the company has traded broadly between $18 and $24. Copper market conditions will remain influential but the company value is likely to stay around the bottom of the cycle until there is more compelling evidence of an improvement in business conditions (i.e. a more sustainable and stronger recovery in copper prices than evidenced so far or a marked improvement in global growth momentum). The existing trading pattern suggests gains in the order of 33% from buying near the bottom of the trading band with a view to selling near the upper end of the range.
John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...
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