Freeport-McMoRan Inc (FCX) — Shares of this major miner with holdings in copper, gold, molybdenum and oil have been decimated due to the crushing bear market in natural resources. But analysts are anticipating a recovery in 2016, and it was announced in August that activist investor Carl Icahn has a large stake in the company.
S&P Capital IQ Equity Research forecasts revenues fell 25% this year but will increase 8% in 2016. It estimates earnings will increase from a loss of 10 cents per share in 2015 to 90 cents next year.
It is likely Freeport-McMoRan will spin off or arrange a joint venture of its oil and gas assets. Management is used to wild fluctuations in natural resources and is emphasizing capital discipline as illustrated by an improving balance sheet. It recently announced a suspension of its dividend and cut $1 billion from oil and gas capital in 2016 and 2017.
While risk in this resource company is still high, especially in light of recent concerns about China’s future economic growth, Capital IQ notes that those concerns have already been discounted in the stock’s price. Its analysts recently raised their opinion on FCX stock to “buy” from “hold” with a 12-month price target of $9.
FCX stock fell from a high near $60 in late 2010 to a low near $6, a level not seen since late 2008. Although shares are still in a bear market, we have seen days of very high accumulation since late August.
Shares are currently trading in the lower range of a bear channel with support at the 52-week low of $6.08, made on Dec. 18.
FCX stock appears to be a bottom-fisher buy under $6.75. My six-month trading target of $9 would result in a gain of 33%. Long-term investors may want to hold shares as a cornerstone investment for a long-term recovery in natural resources.
