Through TheFLY's Eyes: Phelps Dodge Corporation
from Theflyonthewall.com






All That Glitters Is….Copper

Investment strategies and models abound, with portfolios differing depending one’s risk tolerance and investment time horizon, but many analysts say one useful general theory at the start of this decade is to “Invest in companies whose products/services are in-demand in the developing regions of China, India, and greater Brazil.”

One such company is Phelps Dodge (PD). On Thursday, after copper rallied to a record $3.50 per pound, Phelps Dodge led the metal group higher, surging $3.43 to $93.63. Rio Tinto increased $7.86 to $236.36, and BHP Billiton (BHP) rose 10c to $47.16.

Phelps is well-positioned to benefit from this global trend for several reasons. First, Phelps is a leader in one the sweet spot metals/commodities – copper – with the three being: aluminum, copper, nickel.

Demand for commodities, raw materials, commercial and residential building tools is surging in the developing world, and most economists agree that this secular trend is likely to continue for at least the next 2-3 years, and probably considerably longer. Copper is used not only in housing and commercial pipes, but also electrical wiring, and China needs massive amounts of copper to meet its residential and commercial construction needs for both wiring and plumbing. Demand in India and the Brazilian region also is growing.

Second, although a mid-cycle sector performance peak is possible, global copper supplies are unusually low, and that lack of new mining projects is a major why analysts believe copper prices will remain strong for several years.

Further, although Phelps trails Chile’s Codelco in the amount of copper mined, Phelps’ distribution network is substantially superior, particularly in eastern hemisphere markets.

Finally, if demand for copper begins to strengthen in the developed regions of Europe and Japan in the years ahead, as some analysts predict, investors in Phelps may very well able to state that their Phelps Dodge shares are almost worth their weight in gold.