Is Recovery in the Books for Freeport-McMoRan Inc. (FCX)?

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Natural resources has been a terrible laggard this year, as anyone who’s had money sitting in Freeport-McMoRan Inc. (FCX) stock knows all too well.

Is Recovery in the Books for Freeport-McMoRan Inc. (FCX)?

In a two-month span, between June 24 and Aug. 26, FCX stock lost approximately 61% of its value in the markets. Much of this was precipitated by a similar decline in commodities, to which Freeport-McMoRan’s various business divisions are exposed.

Since the middle of May, the spot price of copper gave up 20%, while a barrel of Brent Crude Oil lost about 21% over the same time frame.

But recent headlines suggest it would be a grave mistake to leave natural resources for dead. The commodity making the biggest splash was crude oil futures, capping off a three-day consecutive upswing with an 8% lift on the last day of August.

All of the losses for the volatile month were scrubbed away due to bearish traders’ reactions to supply disruption concerns. Other natural resources, including copper, also trended positively over the past few days, underlining support for Freeport-McMoRan shares.

The hard numbers for FCX stock are tough to deny — a 34% burst in the three days following the Aug. 26 session. Average volume over the short time span amounted to more than 58 million shares, an increase of 230% over FCX stock’s three-month average.

However, the fundamental picture for Freeport-McMoRan is equally difficult to ignore — and not in a good way. Cost of revenue began to rise disproportionately against top-line sales beginning in fiscal year 2014, and actually outpaced sales in the last three quarters.

On the balance sheet, the biggest concern is FCX’s money management, or lack thereof. Between the end of FY2014 and FY2012, Freeport-McMoRan lost more than 87% of its on-hand cash! Even against the last four quarters, the natural resources company continues to bleed green, worrying several investors, particularly because Freeport-McMoRan’s oil and gas division hasn’t performed as expected.

Is Recovery in the Books for Freeport-McMoRan Inc. (FCX)?
Source: Source: JYE Financial, unless otherwise indicated

Despite these critical vulnerabilities, FCX stock’s historical performance in the markets is where most people are turned off. Alhough Freeport-McMoRan’s three-day turnaround is one of the more remarkable rallies in the New York Stock Exchange as of late, FCX is still down a harrowing 58% year-to-date. And unlike the price of gold, copper and crude, FCX stock is in the red for the month of August, down 9.4%.

In addition, the average price of FCX stock for July was more than 36% below that of the prior month. Only two other times in history did FCX give up more on a month-to-month basis, with both incidents occurring in the depths of the 2008 global financial crisis.

Over the years, double-digit monthly losses have only resulted in pain for the Freeport-McMoRan faithful, leading to serious doubts as to whether its shares have truly hit rock bottom.

To put it bluntly, don’t be fooled by the cheapness of FCX — more often than not, there’s a reason for it.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.

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A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.


Article printed from InvestorPlace Media, https://investorplace.com/2015/09/fcx-stock-freeport-mcmoran-natural-resources/.

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