Growth Guru Eyes Copper and Aggregates

12/30/2016 10:00 am EST


Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

As we look ahead, we can’t help but be optimistic, asserts Mike Cintolo. Here, the editor of Cabot Growth Investor looks at two cyclical materials plays with exposure to construction and infrastructure spending.

We remain bullish on the longer-term picture at Freeport McMoRan (FCX). After a five-year slump, copper prices have bottomed, and since the election, anticipation of economic growth has pushed prices higher by more than 20%.

That should be a boon for Freeport, the world’s largest copper miner, especially after the firm has cut expenses to the bone in recent years (it just completed a $2 billion sale of some non-core oil and gas assets, for instance).

The firm returned to the black in the third quarter, and earnings should surge from here as long as copper prices remain buoyant. Obviously, Freeport is as cyclical as they come, and a major breakdown in economic expectations would likely kill the rally.

But given the multi-year bust, long basing effort and powerful breakout, the odds favor FCX being in the early stages of a big, sustained turnaround. We’ll stay on Buy.

We also rate Martin Marietta Materials (MLM) a buy. The calm consolidation of the past few weeks has set up a nice, tight launching pad as we head into 2017.

For our part, we think there’s way too much focus on what may or may not happen with an infrastructure bill in Congress next year, and not enough on the already-approved $305 billion highway bill and many already- approved state initiatives.

And that doesn’t count private commercial and residential construction trends, both of which look solid. As always, we’ll let the stock tell the tale—a break of the 50-day line (now at $206 and rising steadily) would end the intermediate-term uptrend.

But we’re thinking that the next big move is up, and a push back into the mid-$230s would confirm that. If you own some, hang on, and if not, we think you can grab some shares here.

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