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Copper: Why a Multi-Year Bull Market Looms

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Tech Takes a Breather

Though other market segments have performed well since the S&P 500 Index printed lows in late 2022, the dominant sector has been tech stocks, with cash-rich, “growthy,” mega-cap tech stocks doing the heavy lifting. For example, chip leader Nvidia ((NVDA - Free Report) ) is up more than 200% over the past year while its market cap has ballooned to more than $2 trillion. That said, investors need to observe subtle changes on Wall Street and track which groups are garnering attention.

Over the past few weeks, there have been clues that investors are taking their foot off the proverbial gas pedal when it comes to tech’s favorability. For instance, Meta Platforms ((META - Free Report) ) gapped lower, even after posting stellar quarterly results, while the Nasdaq 100 ETF ((QQQ - Free Report) ) has been relegated to a choppy consolidation period. Though tech stocks are likely just digesting their monstrous gains over the past year-and-a-half, it’s the job of the savvy investor to find what areas of the market are in play and exploit them.

The Case for Copper

Stanley Druckenmiller has one of the most impressive track records on Wall Street, never suffering a down year over three decades. Not only is Druckenmiller consistently profitable, but he is also a master at trading across asset classes and finding the most bullish markets. In the fourth quarter, Druckenmiller invested in several gold-related stocks, such as Barrick Gold ((GOLD - Free Report) ) and Newmont Mining ((NEM - Free Report) ). Once again, Druckenmiller’s timing was impeccable, and the SPDR Gold Trust ETF ((GLD - Free Report) ) is up 14.68% year-to-date, outperforming the major equity indices. Nevertheless, though the bull market in gold and silver is widely followed at this juncture, Druckenmiller’s comments on the lesser-followed copper industry stood out to me in a recent CNBC interview. The full quote is below:

“Copper is a pretty simply story. Takes about 12 years, greenfield to produce copper, and you got EVs, the grid, data centers, and believe it or not munitions. These missiles all got enough copper in them and the world’s getting hot that we just think the supply-demand situation is incredible for the next five or six years.”

Meanwhile, X user Brandon Beylo (@marketplunger) brought to my attention an interview with Robert Ivanhoe, CEO of Ivanhoe Mines and one of the most important voices in metals and mining. He recently said, “The intensity of metal demand in conflict is beyond your wildest imagination. In WW1 you needed a telescope to see the price of copper. So, we’re heading to a world where both tribes have a strong demand for more metals. We’re balkanizing the world into two camps, and it’s tearing the global supply chains apart.”

Stock to Buy: Freeport-McMoRan ((FCX - Free Report) )

FCX is engaged in mineral exploration and development, mining and milling of copper, gold, molybdenum, and silver. In other words, investing in FCX is a great way to take advantage of the bull market in the metals industry, namely copper.

Reasons to buy:

·       Freeport is scaling its mining reserves to meet growing demand.

·       A rebound in the Chinese economy will positively affect copper demand, specifically for EVs.

·       The company is reducing its debt.

Zacks Investment Research
Image Source: Zacks Investment Research

Bottom Line

The stars are aligning for a multi-year bull market in the copper industry, driven by demand for data centers, EVs , and defense products.

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