Copper prices started 2018 on a positive streak carried over from last year, and the metal remained well above $3.00 per pound for several months. However, concerns about a looming trade war began to weigh on the outlook for copper in recent months, sending prices plunging to a 52-week low in August. The metal has not been able to post much of a recovery and currently trades at around $2.92 per pound.
Copper stocks were beaten down for a long time, but 2017 gave them some relief, with a particularly strong rally throughout December in response to rising copper prices. With uncertainty creeping into the market and sending copper prices tumbling, it is now unclear whether companies will see continued incentives to maintain or increase production levels. The falling price environment makes it even more essential for those who want to invest in copper to perform due diligence and make some choices about which companies have the most reasonable prospects for success.
We have chosen five copper stocks that could do well in the remaining months of 2019 based on their resilience through previous down times in the copper market. All figures are current as of April. 17, 2019. Here is how the five stocks break down.
- Copper commodity prices declined below $3.00 in 2018 and remain stuck under that level.
- Copper-related stocks have taken a beating as a result over the past two years.
- This may make copper prices a bargain if prices rise in the near- to mid-term.
Southern Copper Corporation
The stock of Southern Copper (SCCO) broke sharply higher several times throughout 2017. The shares finished that year on an even stronger note, rising more than 12.5% in the month of December alone. Since hitting an all-time high above $58 in April 2018, the stock has declined to a low in January 2019, falling briefly below $30.00 before steadily climbing back to $41.85 per share. The company continues to pay a 3.88% dividend, which could be attractive to income-seeking investors.
As the world's largest copper miner, Freeport-McMoRan (FCX) suffers during copper price declines, but it stands to prosper if copper recover. True to form, Freeport shares posted dramatic gains in December 2017, rising 36% over the course of the month as the outlook for copper pricing improved. That strong performance demonstrated that Freeport is in the best position worldwide to increase production and take advantage of profitable copper prices, and it even allowed the company to resume its dividend. However, the recent copper price declines have had a harsh impact on the stock. By January 2019 the stock fell to below $10 per share, before rising to its current price of $14.25.
- Average Volume: 21,442,018
- Market Cap: $20.66 billion
- P/E Ratio (TTM): 6.44
- EPS (TTM): $1.98
- Dividend and Yield: $0.20 (1.41%)
BHP Billiton Limited
BHP Billiton (BHP) has a widely diversified mining operation, but it makes the list of copper stocks to watch because it owns BH Copper. The stock began to climb steadily starting in mid-June 2017, and after essentially moving sideways for a few months, it ticked sharply upward at the end of the year along with its industry peers. BHP Billiton shares have participated in the bout of market volatility starting in February 2018 that persisted through December of that year. 2019 so far has been a good year for the stock as it has risen from below $45 to its current price of $55 per share. BHP's diversified operations may help insulate the stock from the risk of additional downside in copper prices.
- Average Volume: 2,648,004
- Market Cap: $139.08 billion
- P/E Ratio (TTM): 34.32
- EPS (TTM): $1.39
- Dividend and Yield: $2.52 (3.97%)
Anglo American plc
This company mines for a variety of metals, including copper. The chart on Anglo American (AAUKF/AAL.L) shows a steady and orderly rise throughout most of 2016, but the stock was in a base through the first part of 2017. It broke out of that base in June and began climbing, ending the year with strong gains. More recently, the stock has seen plenty of volatility but failed to post significant gains, reaching a 52-week high at the time in May 2018 before erasing its gains for the year as copper prices went south. 2019 has seen the stock recover, hitting a new 52-week high of $28.81 per share in April. The company has been in business since 1917, so this remains a reliable pick for those who want exposure to miners in general and copper in particular.
- Average Volume (AAL.L): 5,587,387
- Market Cap: GBp 20.762 billion
- P/E Ratio (TTM): 6.93
- EPS (TTM): GBp 236
- Dividend and Yield: GBp 0.77 (4.59%)
Rio Tinto plc
Rio Tinto (RIO) pays a 14.1% dividend due to a special dividend announced for the Spring of 2019. Production levels have been rising, although the stock price has posted significant declines recently along with the downturn in copper prices. The company mines other metals besides copper, which helps stabilize the stock price because Rio Tinto is not dependent on the price of any single metal for profitability. The stock slumped through the end of 2018, but has rallied into 2019, making a new 52-week high in April.
- Average Volume: 3,158,298
- Market Cap: $102.45 billion
- P/E Ratio (TTM): 8.78
- EPS (TTM): $5.55
- Dividend and Yield: $2.54 (14.1%)
It should be noted that Codelco, a very large Chilean copper miner, did not make this list because it is state owned and therefore is subject to non-market influences that could affect its value.
The Bottom Line
The five copper stocks on our list are all miners, so they are likely to profit directly from rising copper prices and do not depend on secondary income sources such as futures contracts. All five companies are also large enough that they have assets they could sell in response to a continued collapse in copper prices.
All five also have extensive copper reserves in place that they can put on the market any time they choose. This will help them take advantage of any sudden spikes in the price of copper. The reserves can also be sold if any of the companies want to raise cash for a new opportunity. Investors in copper must watch two indicators at once: 1) the financial health of the company; and 2) the trend in copper prices worldwide. Going long on any of these stocks will require a regular reading of reports on supply and demand for copper.