What happened
Shares of copper miner Freeport-McMoRan (FCX 2.23%) rose by more than 6.5% in late afternoon trading today. The move comes on a relatively strong day for cyclically aligned commodities stocks. By that, I mean stocks exposed to commodities that do well when the economy does well, and copper is traditionally seen as one of those.
It's not that there was any fundamental news driving stocks like Freeport higher. Instead, it's most likely the usual volatility surrounding commodity stocks when the bull and bear debate is in full flow.
The bears' prime worry is the property slump in China and signs of weakness in industrial production in the country, alongside evidence of weakening spending in the U.S.
On the other hand, the bulls argue that long-term demand for copper will be driven by its use in electric vehicles, renewable energy, and the general trend toward electrification in the economy. In addition, supply chain constraints -- led by the difficulty in acquiring permits and political instability in key copper-producing countries like Chile and Peru -- mean prices are headed higher.
So what
While the bull and bear debate carries on, another, more pragmatic view argues that even if you decline to guess where the price of copper is heading and just assume it stays where it is now, Freeport looks like an excellent value. It's a compelling argument and implies that sellers of the stock are taking a negative view of where the price of copper is heading.
Now what
Investors in the commodity sector will already know that it doesn't come without volatility, and today's big rise follows a couple of days of declines for Freeport's stock. Still, the price of copper is significantly higher than it's been over the last five years, and while it stays that way, there's likely to be support for Freeport's stock at the current market cap.
