Please ensure Javascript is enabled for purposes of website accessibility

Why Shares in Copper Miner Freeport-McMoRan Surged in February

By Lee Samaha - Mar 2, 2021 at 8:47AM

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

Investors shouldn't underestimate the exposure copper miners have to the energy transition.

What happened

Shares in copper miner Freeport-McMoRan (FCX 3.01%) rose 26% in February according to data from S&P Global Market Intelligence. The move is the result of two related factors.

First, the price of copper rose through the month from around $3.56 per pound to around $4.10 per pound. Although it's only a one-month movement, it continues a remarkable recovery from a low of around $2.20 in March 2020. The rise in copper prices is a function of the improvement in the global economy, with the metal seen as being one of the most economically sensitive commodities.

Copper wiring.

Image source: Getty Images.

Besides, investors have been warming to the investment case for copper as a backdoor way to play growth in electric vehicles (EV) and renewable energy. Electric vehicles tend to use much more copper wiring than internal combustion engine vehicles and renewable energy requires large amounts of transmission and distribution spending.

Second, gold and copper miner Barrick Gold (GOLD -0.14%) backed off from its reported interest in buying Freeport-McMoRan during February. That's good news for investors who want to invest in copper because if Freeport-McMoRan were taken over by Barrick Gold it would mean the addition of gold into the investment proposition.

So what

As long as supply/demand conditions are favorable, copper prices are likely to rise and that's good news for copper miners. Moreover, more investment in EVs and renewable energy will only add to the chorus of approval from Freeport-McMoRan bulls. Meanwhile, the fact that Freeport-McMoRan is still independent means investors can keep holding and buying a focus on copper rather than switch to other options like Southern Copper or Antofagasta.

That said, history suggests copper miners will respond to price rises by investing in expanding capacity, increasing supply, meaning that some downward pressure will appear on pricing.

Now what

Investors should keep an eye on the global economy and its impact on commodities prices like copper. Meanwhile, the continued adoption of EVs and renewable energy projects is a net positive for copper demand. It's all adding up to a favorable environment for copper miners right now.

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.
FCX
$39.65 (3.01%) $1.16
Barrick Gold Corporation Stock Quote
Barrick Gold Corporation
GOLD
$20.60 (-0.14%) $0.03
Southern Copper Corporation Stock Quote
Southern Copper Corporation
SCCO
$62.76 (2.58%) $1.58
Antofagasta plc Stock Quote
Antofagasta plc
ANTO
$1,470.00 (1.14%) $16.50

*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
344%
 
S&P 500 Returns
120%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/27/2022.

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

Premium Investing Services

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