Cheery Consensus? Not Here... Buy More.

Buffett pointed out that when everything is going great, you've already missed the opportunity to buy share at a bargain.

Mar 26, 2014 at 2:30PM

This article is part of the Real-Money Stock Picks series.

One of my favorite quotes from Warren Buffett is, paraphrased, that uncertainty leads to better buying opportunities. Okay, I'm mashing it up. The original was, "You pay a high price for a cheery consensus." I believe this pertains to an opportunity today.

With copper and gold prices both lower in 2013 compared to 2012, Messed-Up Expectations portfolio holding Freeport-McMoRan Copper & Gold (NYSE:FCX) netted less money on higher volume sales for last year. Further, there was a sharp drop in copper prices this month from about $3.22 per pound down to as low as $2.91 per pound. Add in the dispute the company is having with the Indonesian government about exporting copper concentrate and you might think now would be a terrible time to add to the portfolio's position.

I disagree.

Sales and prices of commodities like copper are highly dependent upon the economy and, as we all know, the domestic and world economy have been in a pretty big funk as of late. Not a recession, but not growing robustly at all. In 2013, fiscal drag through both the sequester and higher taxes weighed heavily, reduced U.S. GDP by 1.3 percentage points last year by some estimates, leading the economy to grow at a disappointing 1.9% annual pace. Thanks to the budget deal  hammered out last December, however, a lot of that drag has been removed over the next couple of years. That should mean the U.S. economy should grow more robustly over the next couple of years, which should improve demand for copper in the U.S.

Shoulda, coulda, will
I know that's a lot of "shoulds," but Freeport McMoRan's management agrees. In the last quarterly conference call, CEO Richard Adkerson said, "In the U.S., demand has steadily improved... We're seeing improvement in non-residential construction and the automobile industry continues to be very strong and an important consumer of copper. As we talk to our downstream customers, we're hearing positive comments about their performance in 2013 and a degree of confidence about 2014."

He mentioned that they're seeing beginnings of recovery in Europe, and China is still spending a lot of money on infrastructure (including a recent announcement by State Grid to increase its spending), which means improving demand internationally.

Competitor BHP Billiton (NYSE:BHP) -- a broadly diversified commodities company -- made similar statements. In its recent quarterly release, it wrote, "Growth in copper production has exerted some downward pricing pressure, with the supply of concentrate exceeding smelter capacity. Improving global economic conditions are, however, set to support demand growth and we expect the copper market to move back into deficit in the medium term."

Still working the thesis
When I originally purchased shares for this portfolio, part of the thesis was the rising long-term trend for copper demand. We've had a period of flatness thanks to very slow economic growth over the past couple of years. But the tide finally seems to be turning. I'll be adding some more shares to the portfolio's position as soon as Fool trading rules allow.

Please come visit the portfolio's discussion board and share your thoughts.

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Jim Mueller owns shares of Freeport-McMoRan Copper & Gold. The Motley Fool owns shares of Freeport-McMoRan Copper & Gold. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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