Now let me get this straight: There's a potential Category Four hurricane eyeing the Gulf of Mexico, and crude oil prices slid about $2 a barrel on Thursday alone. Isn't it supposed to go the other way?
Typically it is, but try to find a commodity that wasn't down meaningfully amid the roller coaster swings that saw the Dow Jones Industrial Average fall by 300 points, only to finish at a much less daunting and death-defying 15-point decline. But wait just a minute, are we taking about equities or commodities?
The answer is both. Fortunately or unfortunately, there's an inextricable relationship between them, which has clobbered a host of companies of late. ExxonMobil's
But the real walking wounded of late, as investors have diverted money from commodities positions to cover other losses or to meet margin calls, have been the mining companies. Shares of copper and gold producer Freeport McMoRan
Along with Freeport, Australian mining giant BHP Billiton
So now let me crawl tenuously out on a limb: With specific regard to Freeport, an incredibly solid company has been cuffed around by the market to the extent that its forward P/E is now less than 8 times. This, despite a PEG ratio (the expected growth rate over five years divided by the P/E, such that lower numbers are better, and scores below 1.0 are terrific) of less than 0.8.
Despite the shares' slide, I'd suggest that Fools avoid the company until general market conditions stabilize and thereby permit commodities prices to grab. When that occurs, however, if you're in search of quality -- albeit with an element of commodity-induced volatility -- you'd be wise to look very hard at Freeport McMoRan.
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