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Dr. Copper Sends Signals
Copper is often referred to as the "smart" metal because of its ability to be forward-looking due to its industrial uses in power and residential and commercial construction.
Copper reached record highs in July 2008 only to plunge 60% by the end of the year. In the fourth quarter of 2008, copper was 46% lower than the fourth quarter 2007.
But in 2009, there has been a small reversal in fortune. Today, copper hit a 3-month high trading over $1.65 per pound and has risen nearly 10% in the last week.
Is Dr. Copper, as the metal is called, signaling a turnaround in the world's economy?
Much of the recent price surge is on hopes of the Chinese stimulus spurring Chinese demand. China is the world's largest consumer of copper.
Interestingly, some of the industrial metal stocks have not yet re-traced to their November lows as the overall markets have done. Is this a bullish signal for copper and the industrial mining sector or a fake-out with more pain to come?
For example, Southern Copper Corp. (PCU - Snapshot Report) hit a multi-year low on Nov 20 of $9.12. Yet it is currently trading over $14 a share and has not re-tested that 2008 low.
The company, a Zacks #3 Rank (hold) stock, has a forward P/E of 9.15. Despite recent dividend cuts, the stock is still yielding 3.40%.
[The author of this article owns shares of Southern Copper Corp.]
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| Market Summary | Feb 10, 2010 00:54 am ET |
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