There's an old -- and very appropriate -- investing saw that says, "Tips are for waiters." So I'm not going to bother giving you a stock tip. I do, however, have a stock idea for you.
What's the difference? Well, a stock tip is generally a hush-hush, wink-wink affair where the tipper expects the tip-ee to run out and buy the stock based on the tip alone. A stock idea, on the other hand, is a good starting point, but is in need of further research before it becomes a fully baked investment thesis.
So let's cut the jibber jabber and get right to today's idea: Southern Copper
To get a better look at how Southern Copper stacks up, let's take a look at how it compares to similar companies in the metals and mining industry:
|
Company |
TTM Net Profit Margin |
TTM Return on Equity |
2009 Estimated Price-to-Earnings Ratio |
CAPS Rating (out of 5) |
|---|---|---|---|---|
|
Southern Copper |
23.2% |
25.2% |
29.6 |
***** |
|
Vale |
30.6% |
26.9% |
16.3 |
***** |
|
Anglo American |
19.8% |
24.4% |
20.1 |
**** |
|
BHP Billiton |
18.7% |
34.4% |
20.8 |
**** |
|
Rio Tinto |
4.5% |
14.4% |
12.6 |
**** |
Source: CAPS, Yahoo! Finance, and Capital IQ, a division of Standard & Poor's. TTM = trailing 12 months.
The chart above highlights a few things. For one, it seems that CAPS members are fans of pretty much the entire metals and mining sector, not just Southern Copper. At the same time though, based on Southern Copper's profitability and return on equity, it makes sense that it is one of the community's top picks in the group.
So why is there so much love for metals? Prevailing wisdom points toward the specter of inflation from actions taken to combat the financial crisis, as well as the potential for demand growth from emerging markets like China.
CAPS member kyddfool believes that inflation is right around the corner and has been bullish on Southern Copper's stock since early May:
copper is up with gold and [Southern Copper] will continue to be a player because the metals are on an upswing and will be there thru inflation......which is the next thing we'll deal with in the not so distant future.
So what do you think? Is this an idea worth pursuing, or is Southern Copper an overrated stock? Head over to CAPS and let the 135,000-member community know what you think. There are 195 stocks in the Metals and Mining tag on CAPS. And if you want to take further advantage of the collective intelligence of the CAPS community, fans of Southern Copper have also been bullish on Freeport-McMoRan
Further Foolishness:
