Freeport-McMoRan Inc (NYSE: FCX)
Freeport-McMoRan is having an incredibly strong day in the market today. If you’re worried that you missed the opportunity here, stop! The truth is that the gains are just beginning. Today, we’ll talk about what causes movement in FCX and two big reasons why gains are likely to continue.
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What Causes Price Movement In FCX
In order to understand the opportunity surrounding Freeport-McMoRan, it’s important that you understand what it is that the company does. The company is a mining company that focuses on several basic materials. About 67% of the company’s income is generated through copper, 11% is generated through petroleum, 10% is generated through gold, and 5% is generated through molybdenum.
Knowing this, it becomes clear that when these commodities gain in price, FCX generates more profits from sales. Primarily, when copper climbs, the company does incredibly well. However, it is important to remember that all products play a role here.
Two Big Reasons The Stock Is Likely Headed Upward
In the introduction of this article, I promised that I would give you two big reasons why FCX is headed upward. Here are those reasons:
Reason #1: Global Push Toward Renewable Energy
Over recent years, we have seen a global push toward renewable energy. Consumers, businesses and governments alike have been working to reduce their carbon footprint on the world. In order to do so, we have to move away from burning fossil fuels and toward renewable energy. This is a great thing for Freeport-McMoRan.
At the end of the day, no matter how the renewable energy is mined, copper is incredibly important. Solar panels, electricity producing dams, and windmills all need the commodity. After all, copper is the best conductor of electricity in the world! As we continue to see a push toward renewable energy, we’re likely to continue to see increasing demand for copper. As the law of supply and demand tells us, this will lift the price of copper, helping FCX drive more profits from the commodity.
Reason #2: Chinese Economic Growth
Throughout most of the year, one of the primary concerns among investors around the world has been China’s economy. After all, this is the world’s second largest economy. So, economic movements in the nation will lead to economic movements around the world. In this particular case, it’s important for FCX investors to remember that China is the world’s largest consumer of basic materials – including copper. This means that as economic growth happens in China, demand for the metal increases. Adversely, economic declines in China will lead to declines in demand for copper.
At the end of the day, China is still struggling. However, we’re starting to see improvements in the economy. As the country works to make its way back up to economic health, we’re likely to see more demand out of the country for copper. This will ultimately cause copper’s price to grow, once again assisting Freeport-McMoRan.
What We Can Expect To See Moving Forward
Moving forward, I have an overwhelmingly bullish opinion of what we can expect to see from FCX. The reality is that the company is in the right place, with the right product, at the right time. As the global shift to renewable energy continues to cause increasing demand for copper and the Chinese economy recovers, the price of the metal is likely to climb. Because the vast majority of income comes from this metal, FCX is likely to see gains as well.
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What Do You Think?
Where do you think FCX is headed moving forward and why? Join the discussion at TalkTRENDZ from CNA Finance!
[Image Courtesy of Wikipedia]