By Shah Gilani, Shah Gilani – Total Wealth Research, 2024-05-22
Have you seen the price of copper recently?
It has soared more than 30% year to date.
The reason is simple…
Copper is the ultimate conductor. It's essential for everything electric.
With demand soaring, supply is struggling to keep up.
In this week's Buy This, Not That, I'm digging into six players in the copper sector… from mining giants to small-cap players.
Which ones have the potential to “electrify” your portfolio? And which ones should you avoid?
It's all in the latest episode of Buy This, Not That… your exclusive guide to the stocks that are worthy of your money – NOW.
Click on the thumbnail below to watch.
TRANSCRIPT
Hi, everybody. Shah Gilani here with your weekly BTNT, as in, By This, Not That. This week, I'm going to cover some copper stocks.
Copper? Why copper? Because copper is hot, people.
Copper, mostly, when you think about it, is used in electricity and transference. It's the ultimate conductor.
Whether we're talking about the grid, whether we're talking about EVs, we're talking about all things electric. And copper's hot because there hasn't been a lot of investments in copper relative to the new crazy demand that's only going to get more.
So demand is increasing, supply is limited, and a lot of these copper companies and the miners are going to have to do a lot more to get supply up.
So that's why the prices are rising… there's not enough supply to meet the rising demand.
Copper's used in everything. And in terms of global growth, we start to see global growth pick up… demand for copper is going to pick up.
They call it Dr. Copper for a reason… because if copper's going up, it's saying that global growth is picking up and demand for copper means growth. It means things are moving forward. And they are moving forward, and that's why copper's moving up.
So let's get into it.
First up, I'm going to bring up Anglo American, symbol NGLOY.
Now, Anglo American's been running pretty flat. They mine copper, and they got other stuff too, but they're in the news lately because there's been a takeover offer for Anglo American by BHP.
Now, BHP wants to buy Anglo American and kinda sell all the stuff that they don't want, but keep the copper business. Now, Anglo American is saying, we can do that ourselves. We don't – why are you going to buy us and strip us out and then keep what you want? We can do that.
We can restructure the company. So they're fighting the takeover offer, and, eventually, BHP may raise that. So the problem with Anglo is this is a company that is not doing great.
So the price has popped up here, and I'm going to give you some fresh prices as I'm recording this because it's important to understand with this one – because I know a lot of you want to know, on NGLOY, whether it's a BUY or NOT because it's maybe a takeover candidate. Well, it's trading at just a shade above $17 right now, and it's had a big pop. So the takeover value, I think the market cap here is probably 5%, maybe 10% below where the takeover value is at around $53 billion. And whether or not BHP is going to raise that is going to come to a head pretty soon.
They're going to have to make a decision on that. So I'm going to say it's not a BUY because if the deal doesn't go through, you don't get a little bit of a pop. You're going to pay $17 or somewhere around there now to try and get another maybe 5%, 10% out of it. It's not worth the risk because if there is no deal, the price could come right back down to, like, $14, $13, in which case, I think it's a buy because then they're going to restructure.
So as far as Anglo American, I think don't chase it up here. It's not a buy up here. You going to take a little too much risk for a deal not to go through.
And if the deal does go through, you're going to make 5%, maybe 10%. Not worth it, the risk-reward in my opinion on Anglo American.
Next up is, I'm going to go to Newmont Mining because a lot of people have asked me about Newmont Mining and copper.
And Newmont Mining, symbol NEM. Definitely, you know, when you think of Newmont, you think of copper, but there you also should be thinking of gold too, which is on a tear also. So that's why I'm including Newmont Mining because it's not just copper – big players in gold. Now Newmont, the problem with Newmont Mining is it's a name for sure, and it's huge.
Newmont Mining, $50 billion market cap, $13 billion in revenue, but the profit margin is negative. It's negative 20%. And the only reason the stock has moved up lately from, you know, the ugly little low of $29 and change to now it's trading $44 and change is because of this push and copper prices, higher copper prices, higher gold prices. But if you look at Newmont Mining, it's not doing great. So it's gotten a lift on the prices, and that's going to help, obviously, the company in the long run.
But it's scary.
It's – be careful. If you if you want to play this for gold and copper, I would say use a 10% stop. I'm not going to say don't buy it because, you know, it's a player. But use a tight stop because if prices start to come down, and I don't think they will, but if they do, Newmont's going to come back down. So use a tight stop on there around 10%, on there.
Another thing, they've got a forward dividend yield of 2.29%. It's a dollar, but the problem is having to borrow to pay that dividend. So another thing that worries me about Newmont is, they're going to have to either cut the dividend or cut it out, because they just can't afford the dividend. If they do that, that stock price may come down on that. But people aren't buying it for the big yield. It does have a decent yield, but be careful with Newmont. That's another reason I'm saying if you're going to play it, tight stop on Newmont.
Next up is, Teck Resources.
Now, Teck Resources, symbol is TECK. This is a Canadian company that currently gets about 23% of its revenues from copper.
They say by 2026, they should be up to, like, 34%-plus coming from copper. That's why I'm including it. Now Teck is a $27 – almost $28 billion market cap company, $15 billion in revenue, profit margin 10.6%. Gotta like all that stuff.
Problem is, for me, they got negative levered free cash flow. So, the dividend is a waste. So I don't even bring it up. It's so thin, it's not worth it.
But the stock's been on a tear because it's a great story stock. So, yes, I say as far as Teck goes, TECK, you can buy it. But, again, right now, trading at – Teck Resources is trading at $53, just a shade under $54.
It had a really nice run… but use a 15% stop. Give yourself a little bit room to run on that one, but I would, again, certainly have a stop in there because if things rolled over as far as copper prices.
The bloom's going to be off the rose for a lot of this sector.
Next up is – now here's an interesting one.
Taseko Mines, symbol TGB.
Now TGB, what I like about TGB is it's a small cap. $855 million market cap. This is the one you're going to really want to dig into.
Teseko Mines Limited, revenue is $556 billion, profit margin is 12%. They make money.
It's got an okay balance sheet.
I like it. It's been in a very tight range, and all of a sudden, it popped. So we're talking a tight range for, like, two years. We're like, a $1.55.
But, I mean, it's gotten a lot lower than that, gotten a little bit above that. But now it's trading at $3, so it doubled in price. I still like it here. I think it's got a lot more to go because it's a small cap.
I like it for that. I like the dollar price on it. And relative to the revenue and the profit margin, Teseko Mines, TGB is a BUY.
Go for it.
Last, well, two more. I'll give you Freeport-McMoRan because, again, it's a player, and I got asked about that.
I do get asked about that lately quite a bit. Freeport-McMoRan, FCX is the symbol.
Again, kinda gone sideways, then boom, all its attention on copper and Freeport has gone up. But Freeport isn't just copper. They're big copper producers, but, yes, they got gold too. So I like that and silver.
I do like Freeport-McMoRan.
It's a giant.
Yeah. $78 billion market cap, $24 billion in revenue, profit margin at 7%. So Freeport, yes. It's a BUY, people.
You know, you want to buy it here in the mid-$50s, you know, give yourself – I'd give this one, you know, 15%, even 20% stockstop because I think longer term Freeport's going to keep on plugging. So Freeport, FCX is a BUY.
Now, last but not least, Southern Copper.
This is the big boy, people. $100 billion market cap. Symbol is SCCO.
I love Southern Copper. Plain and simple. It's a BUY. $100 billion market cap, $9.7 billion in revenue, 24% profit margin.
You want to play copper? Pure copper is probably one of your purest plays. Yes. It's expensive in terms of the price at $129 a share.
But, yes, Southern Copper Company, SCCO, it's a BUY. Take it to the bank.
I'll catch you guys next week. Cheers.
