Saturday, November 5, 2011

"This Copper and Gold company is looking pretty inexpensive here. The stock? Freeport-McMoRan Copper & Gold Inc. (symbol FCX)"

Dow Jones Industrial Average 11,983   (Down) Week ending 11/03/2011

Mr. Dawes, Sr.: "When stand the banks of England,
England stands...when fall the banks of England, England falls!"

 A lesson from the movie Mary Poppins,  from so many years ago. Confidence. If little Michael doesn't save his tuppence at the bank, there will be foreclosures and business failures. When he decides that he wants to use his money to feed the birds instead , and wants to take it with him and the people hear that the bank won't give the money back, confidence is lost, panic ensues, and of course a run on the Dawes, Tomes, Mousely, Grubbs,  Fidelity Fiduciary Bank!

Confidence. The America’s Financial Industry Regulatory Authority gets a little twitchy and asked MF Global to post more capital to back up it's Euro-zone government bond exchange swaps with bets of 6 billion on Spain and Italy government bonds, which in normal times is a low risk exchange transaction. Then Moody's downgrades MF Global's credit rating and all the other firms lose confidence and stop trading with MF Global.

 On Halloween, Trick or Treat, MF Global says trick, and files for bankruptcy and has 700 million dollars of customer account money missingJon Corzine, didn't you notice all those people outside your front window in the "Occupy Wall Street" protest that are there because of financial firms taking excessive risk with money?  I know you are a good guy, so I can only assume that you underestimated this new paradigm of risk that we live in today with the Euro-Zone troubles. I hope it somehow works out.

An Honorary Mention goes out also to Freddie Mac, who announced they lost billions and are asking for another 6 Billion from the government. (disgusted head shake here)  So let's talk now about making money instead of losing it.

Freeport-McMoRan Copper & Gold Inc. (Symbol FCX, $40.32).  With this stock you will see some common themes that I like. First, a 2.49% dividend for some income and to cut down on people shorting the stock. Second , the stock price is down from short term downturn in earnings , but earnings will increase going forward with a forward PE of 7.91. The company is projecting 2012 earnings of $.5.07 which is projected down from a few months ago when it was projected up near $5.57. I think we will have a rise in the price of copper and gold which will bring some of these earnings back in.

FCX has 5 year sales growth of 23.8%. Net profit margins have been 24.50%. The company has been running a return on equity of 38.90%.
To me , Copper is just plain cheap here at $3.56 per pound.

Gold has taken a little breather here, coming down from the $1950.00 and ounce level down to $1755.00 per ounce. This company gives you exposure to both metals. The company is also a Molybdenum mining company, if you have an affinity for that metal.

If you buy this stock you are with good institutional company.  State Street, The Vanguard Group and Blackrock each have 5% of their holdings in this stock. The financials of this company look very healthy to me.

I guess it wouldn't hurt us all to save a little more money and spend a little less. So, put some tuppence in the bank and restore a little confidence in our financial condition.


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