In the basic materials sector, investors seeking discounts should look at Freeport-McMoRan (NYSE:FCX) and Cleveland-Cliffs Inc. (NYSE:CLF). Both firms reported quarterly results recently.
Copper mining giant Freeport reported revenue falling 31% Y/Y to $3.55 billion. Copper sales fell 18%. It forecast operating cash flow of $1.9 billion. Though these data points are discouraging, if copper prices move upwards, the company’s prospects will improve.
The stock trades at a P/E of below 9.5 times while the company will have no trouble managing the debt/equity of one time.
A shortage in copper, driven by higher demand from electric vehicles, plus higher building activity, is a potential long-term catalyst for copper prices and FCX stock.
On July 19, Cleveland-Cliffs reported a non-GAAP EPS of $0.63 as revenue grew 4% Y/Y to $743.2 million. Once again, management delivered a solid result. And if the company continues its share buyback, the smaller float will squeeze bears, who collectively have a massive 25.7% short float position against the company.
Although Cliffs realized prices of under $113 per ton, the company is taking all the right steps to improve shareholder value. It is reducing debt and has about $800 million in capital expenditures ahead.
This expense is due mostly to the new plant. Add the dividend of over 2% and investors who held the stock at below $9 may expect new highs above $13 in the next year.
