Freeport McMoran; Zacks’ Bear of the Day Play

Snakebit: adjective \-,bit\ – having bad luck: very unlucky

You can add another definition to the word snakebit here, and it’s not the phrase “Bear of the Day” which this snakebit stock is. No, you only need to add the company name, Freeport McMoran Copper & Gold (FCX). As if it wasn’t bad enough to be a gold miner over the course of the last couple of years, FCX tried, in vain, to hedge its metals exposure by getting into another very popular commodity. Unfortunately for FCX when it chose to diversify away from gold and copper into oil, it did so when Brent was at $109 and West Texas was at $86. In case you haven’t been paying much attention as of late, oil is trading in the $40s.

Surprising to some may be the fact that gold has been staging a bit of a rally in the face of all this. While the US dollar continues to flex its muscle and bring the commodities space to its knees, the base metal has begun to creep up slowly. But the increase in gold’s price has yet to be reflected in analysts’ opinions of Freeport.

Quite the opposite actually as over the last 60 days, ten analysts have dropped their estimates for the current year while only a single analyst has pushed higher. The activity has helped to suppress consensus estimates down to $1.85 from the lofty expectations for $2.65. The story next year looks very similar as well. Six analysts have brought estimates down, helping consensus dip down to $3.78 from expectations of $5.08 just 90 days ago. The recent quarterly miss isn’t doing much to bolster the stock either. FCX came in 25 cents per share for the quarter ending 12/2014, 10 cents shy of the Zacks Consensus at 35 cents.

As you can imagine, traders haven’t been nice to FCX. After reaching a 52-week high of $39.32 in July 2014 FCX ran out of buying momentum. After stochastic switched from overbought ahead of the high, there was a bearish cross then a subsequent drop below the 25 day moving average shifted by 5 days (25×5). Since that first dip below, FCX has only managed to pop above the 25×5 on November 21st, but couldn’t manage to stay above it for more than a few days. Now you’ve got an extremely oversold FCX that’s dragging its knuckles down at $17.42, off 63% from the highs just a few months ago.

Investors looking to gain more exposure to the metals and mining industry should take a closer look at Zacks Rank #2 (Buy) stocks Alcoa (AAAnalyst Report) and Thompson Creek (TCSnapshot Report).


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