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Red-Hot Metal: Copper Investments to Ignite Your Portfolio!
We’re here to help you electrify your investments with copper stocks, just as the space is helping to power the green energy revolution and create new investment opportunities.
Hi, and welcome to another edition of Investing Intel from the team at ValueTheMarkets! As always, the newsletter is packed with stock picks and investing insights we think you’ll enjoy, including:
👉 Three stock insights
👉 Investing signals
👉 Fear & Greed Index
👉 Key dates for your diary
👉 Some fun facts!
This week, copper is the name of the game.
We’re going to start by briefly outlining why the base metal is sometimes referred to as ‘Doctor Copper’. The phrase is widely used due to copper’s historical reliability in predicting economic growth.
This works because use of the metal is so widespread, demand for goods and services can almost be tracked as demand for the copper!
But Doctor Copper is important beyond its use as a bellwether.
With increasing global demand for electricity and the transition to renewable energy sources, copper is becoming increasingly essential in the infrastructure and technology of humanity’s future.
But which copper stocks do we think are poised for success?
The Kingpin - Southern Copper Corporation (NYSE: SCCO)
First on our list is Southern Copper Corporation (NYSE: SCCO), the sixth-biggest publicly traded miner on the planet by market cap. But, aside from its vast size, what do we like about the company?
For starters, the company has significant copper reserves which are of high quality. These provide a solid foundation for its long-term production capacity and growth, but reserves are all very well. At the end of the day, you need to get at them.
Well, Southern Copper is hungry to do so, with ongoing expansion projects aimed at increasing the company’s capacity for production and quality of the final product. These include the Buenavista project in Mexico, where a new concentrator is expected to double zinc production.
Additionally, the company is working towards bringing several projects into production. These include the El Arco project in Mexico, which is expected to produce 190,000 tons of copper and 105,000 ounces of gold every year, and the Los Chancas project in Peru, which Southern expects will produce 130,000 tons of copper and 7,500 tons of molybdenum annually.
As such, it’s clear the business appears to be sitting on a mass of raw materials and potential.
Beyond this, there are aspects of Southern Copper’s financial performance which are encouraging. The company’s most recent quarter showed net income growth of more than 8% on flat sales, though sales and income fell in 2022.
However, the company’s performance notably strengthened as the year progressed, having been initially disrupted by factors associated with the Russian invasion of Ukraine. With net sales having jumped by over 30% on a quarter-by-quarter basis in the final three months of the year and cash levels looking healthy, Southern Copper appears well positioned.
Huge copper reserves
Strong cash position
The Ambitious Climber - Capstone Copper Corp (OTCMKTS: CSCCF)
If you’re a fan of alliteration, there’s a solid chance you will like Capstone Copper Corp (OTCMKTS: CSCCF). But there’s much more to this company than the letter C.
First, let’s talk about the numbers. Capstone Copper has demonstrated strong financial performance, with growing revenues, healthy profit margins and consistent cash flow generation. The company’s most recent quarterly earnings showed revenue growth from $215.9m to $362.1m.
The business’s consolidated production of 158.8 thousand tonnes of copper is also considerably higher than the 84.9 thousand tonnes in 2021. This major increase is primarily the result of the addition of Mantos Blancos and Mantoverde production.
These Chilean projects were originally owned by Mantos Copper, which merged with Capstone Mining in 2022 to create Capstone Copper Corp.
This combined business is investing heavily in expansion, with plans to turn the Mantoverde and Santo Domingo territories into an integrated district. Capstone says this project is targeting over 200,000 tonnes per year of low-cost copper production with the potential to additionally become one of the largest and lowest cost battery grade cobalt producers in the world.
Large increase in sales
Total asset growth
Ambitious and exciting developments
The Redemption Arc - Vale SA (NYSE: VALE)
We’ve got another mining giant to close out this week’s stock tips, with Brazil-based firm Vale SA (NYSE: VALE). What makes this outfit so special?
For starters, Vale has a solid track record of financial performance, with consistent revenue growth, healthy profit margins, and strong cash flow generation.
Additionally, Vale possesses a very diverse portfolio of mining assets, including world-class iron ore mines in Brazil and other minerals such as nickel and coal. These high-quality assets and low-cost operations help maintain Vale's competitive position in the global mining industry.
This is particularly advantageous because of the current high demand for steel in various industries, such as construction, automotive, and infrastructure.
If you’re looking for an income stock in the copper mining space, Vale might be the stock for you. That’s because the firm offers a dividend yield of more than 7%, which is one of the most significant levels of income offered by a major player.
Finally, it’s worth noting that the company is rebuilding its reputation and restoring its operations after the tragic dam disaster in Brumadinho, Brazil. The company has committed to improving safety standards and compensating affected communities, which may help restore investor confidence and support long-term growth.
Strong financial track record
Large dividend yield
Rebuilding and restoring its reputation
We’ve looked at a sample of copper stocks we like, but what’s in store for the sector at large?
If there’s one key reason investors can feel assured that copper demand will remain robust, that reason would be electricity. Copper is the most widely used metal for key electrical components like wiring because of its superiority as a conductor and its wide availability.
Obviously, the use of electronics is widespread right now, but the replacement of fossil fuels with renewable energy will only accelerate the demand for copper. Analysis from Mckinsey and Company says:
“Electrification is projected to increase annual copper demand to 36.6 million metric tons by 2031. Although current supply projections based on restarts, certain or probable projects, and recycled production offer a pathway to 30.1 million metric tons, another 6.5 million metric tons of capacity (an additional 20 per cent) remain to be found.”
So, there appears to be major demand in the long term. But what about right now?
Copper prices have jumped across the year-to-date, buoyed by China’s bounce-back from lockdown conditions and subsequent economic growth. This has left some onlookers to make bold pronouncements about the metal’s future.
Trafigura co-head of metals and minerals, Kostas Bintas, says the metal will surpass the all-time peak price it reached last year over the next 12 months. That could obviously be very exciting news for investors!
So, what kind of projects can you invest in that are a little off the beaten path? We’ve covered mining giants in our stock tips section, but what about companies which are nearer to the start of their journey?
American Copper Corp (CSE: ACDX) is a mineral exploration company focused on acquiring and developing base and precious metal properties. Its primary objective is to conduct exploration programs on the Lordsburg Property in New Mexico, U.S., which is known for its world-class mineral potential and well-established regulatory environments.
The exploration plan for 2023 includes ongoing drilling, assay results, and data interpretation.
To discover some other interesting copper stocks, visit: 5 Canadian Copper Stocks to Watch in 2023.
Now, let’s look at some recent investing intelligence from the broader market. The top searched stocks from the last week on Google are:
Prometheus Biosciences (NASDAQ: RXDX)
WW International (NASDAQ: WW)
ContextLogic (NASDAQ: WISH)
Anheuser-Busch (NYSE: BUD)
Riot Platforms (NASDAQ: RIOT)
The two newcomers here are RXDX and RIOT, so let’s examine why they are generating so much interest.
The former has seen its share price soar, almost high enough for the company to steal fire from the gods, following the news that Merck will seek to acquire the business at $200 per share. The duo still need to jump through regulatory hoops and win shareholder approval, but with Prometheus Biosciences’ share price having been as low as $114 just a week ago investors are likely to be patting themselves on the back here.
Meanwhile, Riot Platforms has seen its share price head in the opposite direction this week. The crypto-mining business has suffered a drop of more than 10% this week as the price of Bitcoin slid below the $30,000 mark. The cryptocurrency has staged an impressive fightback across the year to date, climbing in price by more than 60%, but some analysts are now arguing that it will fall further in the coming months. This panic appears to be impacting investor confidence in businesses with significant exposure to digital assets.
Fear & Greed
The Fear and Greed Index is a measure of stock market sentiment calculated by CNN Business using seven measures including market momentum, market volatility, and safe haven demand. It’s meant to shed light on the emotions currently driving the market, giving you insight into how traders are making decisions. Remember, traders are humans, not robots.
As you can see from the graphic below, investor sentiment has dulled slightly over the past week but remains positive. It’s possible that the market is seeing some degree of trepidation creep in over the prospect of an interest rate increase in May and signs that the US could be facing a short recession.
Dates in the Diary
Tuesday 25th – FHFA Home Price Index (Feb) / US Consumer Confidence Data (Apr) / US New Home Sales Data (Mar)
Wednesday 26th – US Wholesale Inventories Data (Mar) / Durable Orders Data (Mar)
Thursday 27th – US Pending Home Sales (Mar) / EU Economic and Industrial Sentiment (Apr)
Friday 28th – Chicago PMI (Apr) / US Personal Consumption and Income Data (Mar) / EU GDP Data (Q1)
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Fun Fact – Poker Face
If you’ve made any effort to stay informed about securities, it's almost a certainty that you’ve heard of ‘blue chip stocks’.
But you might not know exactly what this means, or where the phrase stems from.
No, it doesn’t have its origins in a mysterious bag of off-colour potato-based snacks that was found in a dark corner of the New York Stock Exchange’s trading floor.
Instead, the phrase has its roots in poker. In a card game, blue chips are the most valuable units at the table and that tells you exactly how the phrase was coined. Dow Jones employee Oliver Gingold started using the phrase a century ago in 1923 to refer to stocks with a value consistently above $200.
Today, the phrase is used slightly differently, referring to stocks from established companies with a large market cap that can weather challenging economic conditions.
Until Next Time
Many thanks for taking the time to enjoy Investing Intel today, we hope you’ve enjoyed our insights and are looking forward to more in the week ahead.
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