May 3, 2010 – Business is Booming at Freeport McMoRan (FCX)

Featured Trades: (COPPER), (FCX)

3) Business is Booming at Freeport McMoRan (FCX). Another company I track religiously for insights on the global economy is Freeport McMoRan (FCX), the world’s largest producer of copper, and also a major miner of gold and molybdenum. CEO Richard Adkerson says that revenues are up an amazing 67%; demand for the red metal is ‘extremely strong’ and he is expanding production as rapidly as he can. Cash flow is huge, and the bulk of the money is being reinvested back into the business, with the remainder earmarked for a doubling of the dividend. It’s all about China, which is continuing to build at a breakneck pace. No matter how much the Middle Kingdom is stockpiling, the fact is that they are consuming immense amounts of the red metal. The big challenge is finding enough supplies. FCX also received a windfall with Chile’s massive earthquake, which further exacerbated copper shortages (click here for my report), although no one but me is characterizing it as such. FCX has one of the great business models that I know of, ripping ore out of the ground at a cost of $1/pound, and selling it for $3.45 today, and probably $6 down the road. The bottom line is that the emerging market economies are so strong, that it may drag ours up faster than anyone believes possible.

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