Should Investors Buy Copper Stocks In The Stock Market Today?
In the stock market today, a lot of the headlines have to do with rising copper prices. Naturally, that’s a bullish call for copper stocks. After all, copper is one of the most versatile metals on the market. It runs through our homes as part of both our plumbing and electrical systems. And as the global economy continues to recover from the coronavirus pandemic coupled with the already strong demand from China, top copper stocks could be looking to enjoy a good ride. To have a broad idea of how copper stocks are doing, one can take a look at the Global X Copper Miners ETF (NYSE: COPX). This ETF has given a return of more than 170% over the past year.
Given its versatility and importance for so many industries, the demand for such commodities has been on the rise. Sure, the metal plays a key role in traditional infrastructure. But it is the secular tailwinds that make copper stocks a compelling investment in the stock market. For instance, electric vehicles (EVs) require significant amounts of copper. In fact, the red-hot industry requires four times as much copper as traditional ICE (internal combustion engine) vehicles. Don’t even get me started on the renewable energy sector. That’s because solar and wind farms are also users of copper.
Even Goldman Sachs (NYSE: GS) sees an enormous upside in copper prices. The investment bank set a 2025 price target of $15,000 per tonne and calls copper the new oil. Sure, that would be excellent news for companies mining for copper. This could also bode well for top copper stocks. Assuming Goldman is right, could now be a good time to bet on these copper stocks right now?
Top Copper Stocks To Watch Right Now
- BHP Group (NYSE: BHP)
- Freeport-McMoRan (NYSE: FCX)
- Southern Copper (NYSE: SCCO)
- Glencore (OTCMKTS: GLNCY)
BHP Group is one of the largest diversified natural resources companies in the world. The company owns a diverse portfolio of world-class and low-cost operations across the globe. While it has exposure to a wide range of commodities, the key revenue drivers for the company are iron ore and copper. The surge in iron ore and copper markets is a boon for major companies like BHP. The company has generated huge amounts of cash from the run-up in prices since the depths of the COVID-19 crisis.
Last month, the company conducted its first marine biofuel trial in Singapore. The key objectives of this trial include understanding the behavior of the fuel, assessing engine and vessel operational performance, as well as exploring the merits and challenges of biofuels as a marine fuel. This will enable the company to build its strategy in this area, potentially leading to bigger things to come.
According to BHP’s Vice President of Maritime, Rashpal Bhatti, the company is striving hard to influence emissions reductions and fully support moves to decarbonize the maritime industry. That aside, if you believe the price of iron ore could continue to hold up and believe Goldman’s copper price prediction, would you include BHP stock on your watchlist today?
Next up, one of the most direct ways to play a rising copper price is to invest in Freeport-McMoran stock. For those unfamiliar, the company is the third-largest copper producer in the world. According to the company’s annual report, 80% of the company’s 2020 revenue came from copper. But an investment in FCX stock is not without concerns. Over time, FCX stock actually has been a relatively poor investment. Assuming you have invested in FCX stock ten years ago, your position will still be in the red.
The company’s stock price is only showing signs of life after the stock market crash in 2020. Since then, the company’s stock price has been climbing steadily to date. With the U.S. government looking more closely at initiatives to increase investments in the renewable energy and electric vehicle space, Freeport-McMoRan is well-positioned to benefit as one of the largest copper producers in the world. What’s more, the company recently reported first-quarter results, in which revenue rose 73% year-over-year to reach $4.85 billion. If prices stay favorable in the copper market, FCX stocks are poised to climb further.
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Investors who love solar energy stocks should also pay attention to copper miner Southern Copper. That’s because more electricity generation from wind and solar power simply means higher demand for copper for use in the transmission, distribution, and storage of electricity. In brief, the company explores, mines, smelts, and refines copper primarily.
According to the Copper Development Association, generating electricity from renewable energy “has a copper usage intensity that is typically four to six times higher than it is for fossil fuels“. As copper prices are continuing to grow stronger at the moment, SCOO stock could follow suit. Last week, the company reported a strong first quarter. Net sales rose 47.3% to $2.53 billion, while net income jumped 255.6% to $763.8 million. With such strong financials, will you be adding SCCO stock to your watchlist?
Last on the list, we have Swiss commodities miner Glencore. Investors who have invested in GLNCY stock over the past year will notice their investment has at least doubled in value. The bull case for Glencore has been with its strong free cash flows. Notably, the low production costs have helped the company reap significant profits. Of course, copper prices have helped the company’s stock price shoot higher over the past year. But that’s not all, the company’s strong profits of its copper division were helped by the successful ramp-up of Katanga mines.
If you think that copper production is the company’s only business, then you will need to dig deeper. Many that are new to the company find it hard to believe in the breadth and depth of Glencore’s business. In fact, it is expecting its full-year marketing earnings before interest and taxes to range from $2.2 billion to $3.2 billion, the upper range of its guidance. With a stable balance sheet and strong demand for raw materials, would you be adding GLNCY stock to your May watchlist?