Top Picks 2016: Freeport-McMoRan
01/13/2016 7:00 am EST
My speculative Top Pick for 2016 is in the natural resources business; it is a troubled company as measured by its current negative earnings, says Russ Kaplan, editor of Heartland Advisor.
Freeport-McMoRan (FCX) with such products as gold, oil, and copper is in a cyclical industry. It has been hurt hard by the sharp and unexpected slump in these products. To succeed they will need to see the prices of these commodities go up, which I feel is very plausible.
Freeport-McMoRan is trading at such a low price that there is the potential for a capital gain if the company can turn things around.
It is a well managed company and is taking the bull by the horns and taking action to turn things around.
Among the things that are being done is a reduction of capital expenditure by 35% and diluting company shares by selling 96.7 million additional shares. For shareholders, the dividend has been totally eliminated. These are a hard but necessary task.
Carl Icahn, a skilled and well known activist investor has just purchased 8.5% of the company stock and will be a great help in this turnaround plan.
In addition, owners, officers, and directors own 3.4% of the company shares. This indicates that some very important and knowledgeable people believe in the company.
Freeport-McMoRan is not for the faint of heart and only should be purchased only if you have nerves of steel and can afford to lose all the money you invest in this speculative situation.