Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why Freeport-McMoRan Soared Nearly 100% in 2020

By Lee Samaha - Jan 3, 2021 at 5:07AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The copper miner has a number of strong tailwinds behind it, such as investments in electric vehicles and renewable energy.

What happened

Shares of copper and gold miner Freeport-McMoRan ( FCX -1.46% ) soared 98% in 2020 according to data from S&P Global Market Intelligence.  The move is mainly about copper and comes from upgrade expectations to near and long-term growth prospects.

First, a recovery in the global industrial economy, and particularly in Asia, led to a strong recovery in copper prices. Having started the year at around $2.50 per pound, the price of copper fell to $2.10 in March as the pandemic spread from its country of origin, China. However, a strong recovery has taken place since then, and it ended the year at around $3.50 per pound.

Copper wiring.

Image source: Getty Images.

Second, there's an increasing appreciation for the fact that investment in two hot technologies, renewable energy and electric vehicles, is likely to lead to increased long-term demand for copper. Simply put, generating electricity from renewable energy requires significantly more copper wiring than conventional electricity. Similarly, electric and hybrid vehicles also require significantly more amounts of copper wiring than internal combustion engines.

So what

In theory, miners should be priced on a long-term assumption for copper prices and an assumption over the miner's current and future reserves. However, the volatility in the stock prices of mining stocks suggests that sentiment play a huge role in determining stock price movements.

Consequently, the stock market has reacted strongly to the near-term increase in copper prices -- a rate of increase that may slow as copper supply catches up with the boost in demand from the recovery in Asia. In other words, don't be surprised if the stock price of Freeport-McMoRan corrects at some point. 

Now what 

Indeed, the near-term the price of copper may well moderate in 2021, but that won't worry long-term bulls too much. Instead, longer-term investors will focus on the ongoing growth in hybrid and electric vehicle sales and renewable energy as well as the global economy in 2021 and beyond. As such, any significant weakness in the share price, and/or the price of copper could lead to a buying opportunity. Something to keep an eye out for in 2021. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Freeport-McMoRan Inc. Stock Quote
Freeport-McMoRan Inc.
$36.56 (-1.46%) $0.54

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/06/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.