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Tuesday, November 20, 2012

PCLN

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Thursday, November 15, 2012

FCX vs. SCCO

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From a fundamental persepective, Expansion costs and higher energy prices have led to a lower cash flow for FCX.  On 7/30 they reported a neg cash flow of about 445M. On the balance sheet, that is the lowest level in 2 years they have made from operations.  Southern Copper has a profit margin of 29% and operating margin of 53%, Freeport's profit margin is 17% and operating margin is 32%, making SCCO more likely to survive if copper prices should happen to depreciate any more than they have since 2011. Freeport also has its hand in the gold industry, so overall, if gold and copper prices fall, so will Freeport.
However, Freeports debt is sustainable and with a p/e ratio of 12.6, compared to Southern Coppers 15.2, prices are attractive in this area.  Both are extremely attractive when compared to other miners, the average p/e for the metals and mining industry is 25.3.

Overall, I like FCX at 41 for a longer term hold.  I like SCCO over today's (11/15) highs for a trade only. My personal opinion is to stay ALL CASH until the fiscal cliff is dealt with though.  Until that happens, all markets (metals, equities, bonds) will probably remain choppy for the most part.