Spotlight: Earnings From Freeport McMoRan Puts Copper & Gold ETFs In Focus (FCX, XLB, COPX, UUP, GLD)

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January 20, 2012 12:17am NYSE:COPX NYSE:GLD

Stoyan Bojinov: Equity markets have been on a bullish streak all week as positive economic data on the home front coupled with encouraging developments overseas have helped to restore investors’

confidence. Positive momentum on Wall Street has translated into weakness for the U.S. dollar (NYSEARCA:UUP), helping commodities to inch higher across the board. With earnings season well underway, the spotlight shifts to mining giant Freeport McMoRan Copper & Gold and firm’s 2011 year-end results [see also 12 High Yielding Commodities For 2012].

Earnings In Focus

Freeport McMoRan Copper & Gold (NYSE:FCX) posted its quarterly performance results on Thursday morning and the reaction from investors was quite volatile. The company reported earnings of $0.67 per share, surpassing the Thomas Reuters consensus by just two pennies [see also Gold Is Cheap, Is It A Buy?]. Traders frowned at the slightly better-than-expected results immediately; shares of FCX opened at $44.59 and sank as low as $43.31 in the first hour of trading. Nonetheless, buyers stepped in at the low levels and scooped up shares of FCX on the cheap, and relatively high trading volume propelled the stock price higher back above the $44.60 mark.

The mining behemoth raked in $640 million in net income, a modest slump compared to its net income of $1.5 billion in the fourth-quarter of 2010. Sales from mines for the year 2011 totaled to 3.7 billion pounds of copper, 1.4 million ounces of gold, and 79 million pounds of molybdenum. The firm’s projected consolidated sales from mines in 2012 is as follows: 3.8 billion pounds of copper, 1.2 million ounces of gold, and 80 million pounds molybdenum. Analysts at Deutsche Bank and JPMorgan Chase & Co. currently have “buy” and “overweight” ratings on the stock respectively, while Standpoint Research recently downgraded their rating from “buy” to “hold”. [Related: SPDR Gold Trust (NYSEARCA:GLD)]

Ways To Play

Investors looking to focus in on the metals & mining corner of the market have  a variety of instruments available at their disposal. Aside from direct investment in shares of Freeport McMoRan, some may wish to gain more direct exposure to the firm’s underlying business; seasoned traders can opt for gold and copper futures contracts [see Commodity HQ Trading Center].

Those who are looking for more indirect access to the mining sector may wish to consider a number of available exchange-traded products that maintain significant allocations to Freeport McMoRan. The State Street Materials Select Sector SPDR (NYSEARCA:XLB) is a popular offering which allocates close to 9% of its total assets to shares of the mining behemoth. Investors who wish to overweight exposure to the industrial metals corner of the mining sector ought to consider the Global X Copper Miners ETF (NYSEARCA:COPX). This ETF holds roughly 30 companies from around the globe that are actively engaged in the copper mining industry; Freeport McMoRan accounts for roughly 5% of total assets [see 13 Ways To Invest In Copper].

Written By Stoyan Bojinov From CommodityHQ Disclosure: No positions at time of writing.

CommodityHQ offers educational content, analysis, and commentary on  global commodity markets. Whether you’re looking to speculate on a  short-term jump in crude or establish a long-term allocation to natural  resources, CommodityHQ has the information you need.

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