The Stock That Has It All
Sometimes you find a stock that manages to hit all the bases, that gives you half a dozen reasons to buy it. Right now, that stock for Cramer is Freeport-McMoRan.
FCX is an enormous producer of gold, copper, silver, and now, because of a recent merger with Phelps Dodge, copper. All these holdings in natural resources make it a great hedge against inflation, which is a concern of the Fed’s and therefore a concern of Cramer’s.
Another reason to love the stock is that FCX priced a secondary offering today for 41 million shares at $61.25 that, as of this moment, is up nicely. The original number was for 35 million shares, but they had to boost the amount due to demand. This offering is two times oversubscribed. That’s empirical evidence of the demand in the market for FCX.
Cramer says to ignore the analysts that used the pre-merger numbers to come up with estimates for FCX. He thinks the company is going to blow away those estimates. The deal roughly tripled its total earnings and only doubled its share count.
And then there are the people who tell you that copper is all U.S., and therefore we should be selling anything with copper exposure. Not true, says Cramer. Ten years ago, the U.S. used 30% of the world’s copper, and China used 10%. Now those statistics are flipped. Copper is all about ROW – Rest Of World, in Mad Money speak – and the commodity is just on fire these days.
If copper goes back to its old high, Then Freeport could be trading at four times forward earnings. That’s the lowest Cramer has ever seen on a stock like this, and FCX is growing. He’s predicting Freeport gets to $100, and maybe even higher if copper hits $4.
The hidden story in Freeport-McMoRan is that it’s the largest producer of molybdenum – a material used to harden steel – and it’s the only company set to draw from a new mine in the past 20 years, and there aren’t any plans for another for the rest of the decade.
Bottom Line: Freeport-McMoRan is everything you could ever want in a stock right now – it’s part of a happy oligarchy, it’s a hedge against inflation, it’s leveraged to ROW, loved by the market and underestimated by the analysts. FCX has it all.
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