Thursday, December 9, 2010

Freeport-McMoran's Big Day

Freeport-McMoran (FCX), came out with some big announcements today: a 2-1 stock split and a $1/share special dividend.  FCX closed up 2% today at $110.66 on the news. 

The stock split was approved by the board of directors today and will take place in February 2011.  As for the special dividend, the payments will be sent out on December 30 for all shareholders that hold the stock as of December 20.  You have some time to get a stake in FCX to reap this special dividend.

Freeport's stock is able to boost its regular dividend from $1.20 to $2 and issue a special dividend based on its huge profits from the rising copper prices.  The stock is up 38% this year and is positioning itself to move higher.  Freeport is stepping up production to meet the demand for copper and is certainly reaping the benefits.  Copper is expected to continue its climb after it closed at a record high yesterday, in the wake of higher demand and the construction of housing. 

These events are fantastic but it also tells us, the investor, that Freeport cares about its shareholders and really want to return value to the shareholders.  This is always a classic sign of a great, well-run company.

Fundamental Analysis
P/E: 14
Forward P/E: 11
Price/Sales: 2.84
PEG: 1.28
Price/Book: 4.4
ROE: 39%
Total Debt/Equity: 41
Revenue: 18B
Dividend yield: 3% (regular+special)
Earnings Growth (this year): 43%
Earnings Growth (next 5 years): 8%

Based on the fundamentals, it isn't oversold but the 8% growth over next 5 years isn't super attractive.  However, you have to look at the some of the good signs: low P/E, low P/S, good ROE, great dividend.  Remember, this is the bare bones fundamental analysis, more in depth would be needed to assume this is a good investment for you. Personally, FCX is a great way to play the rising demand of copper.  They have solid management that know how to please the shareholders and they will continue to position themselves to profit nicely from copper and gold.  FCX is one of my favorite mining stocks out there.

Trade: Pick up some FCX before December 20 to get in on that special dividend.  I am bullish on FCX until copper's demand decreases.  I would then scale back.  In short, if you buy FCX, you have to be able to watch the copper and gold futures to monitor price movements and how they will affect the stock and its earnings.

Disclosure: plan on buying FCX in near future

Disclaimer: Invest Chief is not held accountable to any loses sustained by stocks recommended. It is always important to do your own research of the stock before you invest. These trades and ideas are the opinions of the crew of Invest Chief. Invest Chief receives absolutely no compensation from companies that are recommended. We are a private organization, dedicated to promoting financial well being and prosperity.

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