With the price of copper showing serious strength and recently soaring to new 8-year highs, taking a look at companies that offer exposure to this commodity might be a move that pays off for investors. It’s a versatile metal that has a ton of different industrial applications and is often used to predict turning points in the global economy. The base metal has even earned the nickname “Doctor Copper” thanks to the fact that it is often considered to be a reliable leading indicator of economic health.
The rising price of copper might signify that good things are coming for the economy, but it should also result in a rally from stocks that are involved in the copper industry. That’s why we’ve put together a list of 3 live wire copper stocks to buy now to provide insight into some of the best investment options if you are interested in adding exposure to the base metal. These stocks are already showing relative strength in the market and could be in for more upside throughout 2021 should the rally in copper prices continue.
This company is a leading global mining and metals group that offers exposure to things like iron ore, aluminum, diamonds, and the aforementioned copper. There’s a lot to like about this industry leader, as it tends to perform well during periods of economic uncertainty and offers investors nice long-term upside. While Rio Tinto generates the majority of its revenue with its iron ore assets, the company also has three copper operations in the U.S., Mongolia, and Chile, as well as two copper growth projects in the U.S. and Mongolia.
The company recently delivered positive 2020 earnings results including a 13% year-over-year EBTIDA increase to $23.9 billion. Rio Tinto’s balance sheet is also quite strong, with a small net debt figure of $0.7 billion that allows the company to return a lot of money to shareholders. The stock currently offers investors a 4.41% dividend yield and Riot Tinto grew its payout by 26% year-over-year in 2020. This is a strong mining stock that offers investors a great way to gain exposure to copper at this time.
Next up is Freeport-McMoRan, a mining company that is one of the world’s largest publicly traded copper producers. When you stop to think about all of the different markets for copper, including construction, electrical applications, consumer products, transportation, industrial machinery, and more, it’s clear that a company like Freeport-McMoRan has a big role to play in the world’s economy. The stock should benefit from a tight supply and strong demand for copper in the near-term along with the potential for rising inflation and additional U.S. stimulus. Combine that with the fact that copper is essential for creating electric vehicles and many electronics products and you have a company with real upside.
With a strong portfolio of copper-producing assets including the Grasberg minerals district in Indonesia, which is one of the biggest copper and gold deposits in the world, this company is essentially the gold standard in copper mining. In Q4, Freeport reported a year-over-year revenue increase of 14.9% to $4.4 billion. Freeport’s management estimates that every $0.10/lb. change in copper price increases the company’s annual EBITDA by $400 million, which bodes well for the company given the recent trend in copper prices.
Southern Copper Corp (NYSE:SCCO)
Another big copper-producing company to look at if you are bullish on the base metal at this time is Southern Copper Corp. This company uses state-of-the-art mining and processing methods such as global positioning systems to produce copper, molybdenum, zinc, and silver. All of the company’s mining, smelting, and refining facilities are located in Peru and Mexico, and Southern Copper is also involved in exploration efforts in those countries along with Argentina, Chile, and Ecuador. Southern Copper’s management believes that it has the largest copper reserves in the world and the company’s high level of vertical integration means that it can manage the entire production process for copper.
In 2020, the pandemic disrupted the company’s copper production, yet Southern Copper was still able to reach new production milestones and top 1 million tons of copper production. The company’s net sales in Q4 increased by 26.7% year-over-year to $2.3 billion while net income increased by 93.1% year-over-year to $590.2 million. Southern Copper is a legitimate option for investors to consider given the strong earnings and large copper production figures, and the fact that the stock also offers a 3.23% dividend yield is a nice bonus.
Before you consider Rio Tinto Group, you'll want to hear this.
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