When considering any stock for your portfolio, don't be swayed by just the positives. Examine its pros and cons, and decide whether its possible upside outweighs its risks. Let's take a look at the copper-mining company Taseko (AMEX: TGB ) today, and see why you might want to buy, sell, or hold it.
The first reason you might want to buy Taseko is its industry. Copper is here to stay and as the global economy gets back on its feet, commercial and residential construction and upgrades will push up demand for it. This is especially true in developing markets, as developing means building. Nations such as China and India will need copper, and lots of it. China, which is responsible for about 40% of the world's copper demand, has already been loading up on the metal recently. Last year, mining equipment maker Joy Global (NYSE: JOY ) waxed bullish on copper, noting that it was the metal with "the strongest fundamentals."
The copper company isn't sitting still, either. It has Canada's approval to build a $1 billion gold and copper mine in British Columbia, in the world's seventh-largest undeveloped gold-copper deposit. Pair that with rising copper prices, and it gets even more promising. The price of copper recently hit a three-month high, which has given stocks such as Taseko and Southern Copper (Nasdaq: SCCO ) a boost.
Taseko sports lots of lovely numbers, too. Over the past three years, the company has posted average annual revenue growth rates in the double digits, and earnings growth rates in the triple (or more) digits. Net profit margins are roughly 20%, and current and forward price-to-earnings ratios are around 13 or 14. The company's reserves have been growing strongly over the past year or so, as well.
Another boon is a discovery of high-grade niobium in Taseko's Aley property. It's a rare and valuable mineral, much of which is used in steel-making.
Finally, there's speculation from some that Taseko might get bought out by a bigger company, which often serves to give a stock a big price boost. Don't act just on rumors or speculation, though.
So why would you sell a stock like this? Well, copper prices don't always rise. Last fall, prices were at 14-month lows, and copper-related stocks had slumped, in response. That can happen again.
Other factors that can hurt the company, and thus the stock, include bad weather, unfavorable currency exchange rates, rising fuel costs, and poor results from mining activities.
Clearly, the company has a lot going for it. But it also faces some risks, as most companies do. If you'd rather invest in companies with fewer risks, you can -- and should -- as they're out there.
As for me, I'm not rushing into Taseko just yet, but it is tempting. It seems worth keeping an eye on and considering for a berth in our portfolios.
Looking for promising investments? Here are "5 Stocks With Explosive Potential" and "4 Stocks as Cheap as They've Ever Been."