I like FCX in that the company has a huge margin of safety while still having tremendous upside on anything but the worst scenarios of copper under $1.00. FCX is the lowest cost producer and their break even cost after credits for byproducts is $1.00. If copper pricing turns out to be flat to slightly down, FCX trades at 6-8x free cash flow. Granted this multiple could be looking at peak earnings but over the full cycle FCX is still trading below 10x. I also believe that FCX having negative earnings in the cycle is unlikely going forward as I cannot see copper trading back to $1.00. Since the business will have less cyclicality (no negative earnings), the multiple prescribed can be higher at say 12x bringing a strong return (perhaps a double from these levels).
In addition, FCX has projects available to increase growth should copper prices appear sustainable above $3 on a longer term basis. FCX management believes this to be the case as they are spending CapEx above maintenance CapEx requirements. In the last quarter, FCX guided for next year CapEx spending 2.6B with only 1.2B being maintenance capital.
If copper prices are able to trade higher, lets say $4 FCX is trading closer to 4-6x free cash flow and trading at perhaps 8x the full cycle. In that case I can see FCX an even larger double.
While I have not gone through Phil Fisher's 15 point checklist point by point, FCX seems to be a stock that Fisher might purchase.
Long FCX
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