July 21, 2013 in Business

Freeport-McMoRan’s price offers promising opportunity

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When the stock price of the world’s largest publicly traded copper producer falls by about a third over five years, it’s worth taking a closer look. The company is Freeport-McMoRan Copper & Gold (NYSE: FCX), and part of its problem has been the price of copper, which has dropped from around $3.70 per pound at the start of the year to $3.16 recently. (Gold, too, is down, falling more than 25 percent in the first half of 2013.)

The company is not just focused on copper, gold and other metals, though. Last year it bought McMoRan Exploration and Plains Exploration & Production, adding oil and natural gas assets to its portfolio. Investor opinions are mixed on the move, but it does diversify operations.

Still, it’s much more a copper company than an oil company. On the plus side, lower copper prices are expected to be offset by anticipated improvement in the ore grade coming out of the Grasberg mine in Indonesia this year and next, which should lower the company’s average production cost per pound.

The decline in the share price for this miner is a promising opportunity. Copper is still one of the most highly used metals, and the long-term-demand trend is upward. Consider buying into the company or adding it to your watch list, perhaps while keeping an eye on the integration and performance of the oil business.

Ask the Fool

Q: I’m a beginning investor and have heard that when it comes to mutual funds, I shouldn’t bother with anything but a low-cost index fund. Is that right? – V.E., Salisbury, Md.

A: For most people, a broad-market index fund is perfect. An S&P 500 fund will instantly have you invested in 500 of America’s biggest companies. (Many of them have substantial overseas operations, too, giving you valuable international exposure.) You can go even broader with something like Vanguard’s Total Stock Market Index, which also includes smaller and medium-size companies, or the Vanguard Total World Stock Index.

Seek index funds with low fees, such as ones from Vanguard, Fidelity, Schwab and others. They often charge less than 0.25 percent annually.

My smartest investment

I’ve made many smart investments, such as a 450 percent gain in three years – along with bad ones, such as a 100 percent loss in three days. Along the way I learned discipline, how to be calm under fire and to have respect for others.

Discipline has allowed me to let my children learn tough lessons, even when my love for them had me yearning to bail them out, which would have robbed them of a chance to learn lessons in an inexpensive setting. Respect for others is a no-brainer, but many of us lack it. Arrogance and racism show a lack of respect for others – and are wrong.

I also learned to be responsible for myself – socially, spiritually, physically and financially. When I became disabled and no one would sell me health insurance, the Veterans Administration gave me coverage – because I’d served my country. That was by far my best investment. – K.B., Oreana, Ill.

The Fool responds: There isn’t much we can add to that. We’re big believers in people taking financial responsibility for themselves, but you’ve gone well beyond that.


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