Material gains

Copper pays off for Terry Bedford

So much for a 12-month price target. Back in our March issue, Terry Bedford, president of Hamilton, Ontario-based Bedford & Associates Research Group, made an aggressive call when he said shares of Freeport-McMoRan Copper & Gold Inc. (FCX) would climb from $51 to $90 within 12 to 18 months. (“The Price Is Right,” Moneywise). Well, just six months later, FCX shares closed at $91 in early July–a climb of more than 78%.

The Phoenix-based company mines and produces copper, gold, and silver. Much of its success can be attributed to its $26.3 billion acquisition of a rival copper mining corporation, making Freeport- McMoRan the largest publicly traded copper company. That acquisition, and strong commodity prices, helped fuel the company’s first-quarter earnings growth of 89%.

“The company’s buying all its competition,” says Bedford, who mentions that metal prices such as copper stay strong because the number of companies in the sector is relatively small, allowing corporations to exercise more control of its value. “When the price declines, Freeport-McMoRan simply slows production.”

As a commodity, copper’s value has also benefited from rapid development in Brazil, Russia, India, and China, with the accompanying high demand for raw materials. Copper is most commonly used in construction, and has seen a surge in export due to China’s building boom.

As for Freeport-McMoRan, it is likely to remain stable because it’s a strong business. If you followed Bedford’s earlier advice to buy, he now recommends taking some stock off the table, selling 60% and holding the rest. All told, Bedford’s portfolio is up 25%, more than double the 10% gain of the S&P 500.

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