Copper has a tendency to make a major seasonal bottom in December and then a tendency to post major seasonal peaks in April or May, explains seasonal timing expert Jeffrey Hirsch, editor of Stock Trader's Almanac.
This pattern could be due to the buildup of inventories by miners and manufacturers as the construction season begins in late-winter to early-spring. Auto makers are also preparing for the new car model year that often begins in mid- to late-summer.
One way we like to gain exposure to copper and its seasonally strong period is through the highly correlated stocks of companies that mine and produce copper.
Global Brass and Copper Holdings (BRSS) is our favorite small cap stock that is highly correlated to copper. Copper’s rout in 2018 caught up with the company, but it has held up better than other stocks in the copper arena because of its use of recycled materials and the value-added nature of their products.
Plus it pays a 1.4% dividend. This company primarily operates in the U.S. as a converter, fabricator and processor of copper and brass products.
Global brass is not a mining company; they are essentially a recycler that produces sheet, strip, foil, rod, tube and similar products from processed scrap, used copper cathodes and other refined metal sources. Although based in the U.S., the company also has some operations in China, Japan, United Kingdom and Germany.
With copper appearing to set its perennial seasonal low in December and Global Brass and Copper's solid business, they are well positioned to drive growth organically as well as through acquisitions. The stock is recommended for risk-oriented investors.
