And with 99% returns in 2020, the global copper giant came in No. 1 among the picks from InvestorPlace’s top analysts… giving me bragging rights at company cocktail parties for at least the next few years.
Freeport, indeed, has been the gift that keeps on giving for members of my Speculator and Fry’s Investment Report services. We’ve taken triple-and even quadruple-digit profits several times over the past couple of years on various FCX positions.
Thing is… Freeport hadn’t finished its recent epic run.
Since the end of 2020, the stock has climbed another 50%, more than four times the gain of the S&P 500 index over the same time frame.
A rallying copper price deserves most of the credit.
Thanks to a potential port worker strike in Chile (a major source of copper) and other supply/demand factors, on Monday, copper prices hit their highest level since July 2011, $4.44 per pound, up 2.4% on the day.
That’s 122% above the four-year low near $2 a pound copper reached in March 2020. This dazzling recovery has powered Freeport’s share price to its highest levels since 2012.
After such a massive move, you might think the metal and Freeport are due for a slowdown.
But I don’t think so.
In today’s issue, I’ll explain why.
And I’ll offer another idea for investing in this commodities megatrend…
Metals Not Money Losers
Somewhat ironically, the day after copper and Freeport posted their highs, Tesla Inc. (NASDAQ:TSLA) reported “record” sales and net income — and saw its share price drop nearly 5%.
Despite the records, it was no blowout… and investors knew it.
Literally all of Tesla’s profits came from its bitcoin holdings and $518 million in regulatory credits. In other words, Tesla still isn’t making money by building cars.
The future of electric vehicles (EVs) is clearly huge, but most of the leading companies in the EV and energy storage sector are losing money. The Chinese EV company Nio Inc. (NYSE:NIO) is another high-profile example.
According to calculations from FT Alphaville, a representative selection of 23 EV manufacturers, nine battery/cell producers, and nine charging station businesses recently reached a staggering combined market value of $1.6 trillion.
Incredibly, only six of these 41 EV companies managed to generate a gross profit over the last 12 months. The other 35 were money losers.
That’s why in my services, rather than invest in money losers in the EV sector, I have recommended companies that provide essential ingredients to the EV and energy storage industries.
I’m talking about “battery metals.”
EV and energy storage technologies require vast amounts of metals like lithium, copper, nickel, and manganese. The average battery-electric vehicle, for example, contains about 180 pounds of copper — that’s about half as much as the average American home.
So, it’s likely that the boom in EVs and energy storage will create major “echo booms” in several metal markets.
That’s why I’ve recommended Freeport-McMoRan and other battery metal miners.
EVs require four times as much copper as traditional internal combustion engine vehicles. Solar and wind farms are also adding to demand.
It’s also the go-to metal when it comes to building, particularly in electrical wiring and plumbing. If you’re building something, copper plays a role.
In fact, about 43% of all mined copper is used in building construction. Another 20% or so goes to transportation equipment — and that figure will only climb as our world increasingly turns to electric vehicles.
Copper.com reports that EV sales growth will increase demand for copper by 1,700 kilotons by 2027.
As a result, investment bank Goldman Sachs recently set a 2025 price target of $15,000 per ton, against a current $8,700.
Obviously, that would be excellent news for Freeport and other copper miners. Eighty percent of Freeport’s 2020 revenue came from copper. That makes the company the world’s third-largest producer.
And remember, a rising copper price is not the only factor that will power Freeport’s earnings growth over the next few years.
The company’s massive investments to increase production at its Grasberg mine in Indonesia are just starting to bear fruit. As a result, companywide annual copper production should jump about 40% over the next two years to 4.2 billion pounds, while gold production should double to 1.8 million ounces.
Those hefty production numbers could produce EBITDA well over $10 billion and earnings per share above $3 next year. That EPS number would be nearly triple would Freeport has reported for the last 12 months.
Large supply deficits are also on the horizon, in part because of that potential strike in Chile.
The story is becoming all-too-familiar: Soaring new demand from EVs and other electrification technologies, coupled with stagnant global supply growth, are creating a supply deficit in the copper market.
The “Greener” Battery Metal
Obviously, no one can predict the exact growth rates of the coming battery boom. But the trend is quite clear. And this trend points quite clearly to booming demand for battery metals like copper.
Freeport-McMoRan is perfectly positioned to cash in on this decades-long boom. Today, the stock is changing hands for around $40 a share. But as the battery metal booms continues to gain momentum over the next few years, I expect this stock to continue moving higher, as copper inches toward its all-time high at $4.62 a pound.
So, Freeport remains great copper play on the battery boom.
In fact, just a couple of weeks ago in the Investment Report April monthly issue, I recommended the miner of a lesser-known metal that could help provide a “greener” alternative to lithium-ion batteries for energy storage.
Its shares offer a compelling play on this dynamic corner of the battery metals market. The company’s continuing success and rising profitability could propel its share price to significant gains over the next two or three years.
Its shares are already up nearly 60% from where I recommended it less than a month ago.
And my next Investment Report pick is just around the corner. To learn more, go here.
P.S. Hundreds of thousands of folks saw my “Technochasm” viral video from earlier this year.
Well, the whole world has changed since then… and I’m back to talk about the Technochasm, the biggest megatrend in investing, in ways I couldn’t before… and discuss opportunities for even bigger market gains… the kind to keep you from falling behind. And I’m bringing along investing legend Louis Navellier to join me on camera for the first time ever.
On the date of publication, Eric Fry did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
Eric Fry is an award-winning stock picker with numerous “10-bagger” calls — in good markets AND bad. How? By finding potent global megatrends… before they take off. In fact, Eric has recommended 41 different 1,000%+ stock market winners in his career. Plus, he beat 650 of the world’s most famous investors (including Bill Ackman and David Einhorn) in a contest. And today he’s revealing his next potential 1,000% winner for free, right here.