Where I'd Buy 'Copper' After Trump's Imports Tariff Announcement
Freeport-McMoRan, also known as "copper" on the stock exchange floor, could be set for a breakout.
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There were a number of stocks that had nicknames back during the "open outcry" glory days of fair two-way price discovery on the NYSE trading floor. You could always use the corporate names when making verbal bids or offers, and if you were new to the business, or the stock was new to you, you could use the symbol.
That said, seasoned traders had shortened a number of multi-syllable corporations for reasons of brevity or just used cute names for the fun of it.
Multiple fast-food chains were listed at the NYSE, but if you mentioned "burgers," you were talking about McDonald's MCD. Disney was the "the mouse." International Business Machines IBM was simply "big blue." Procter & Gamble PG was reduced to "tide." Southwest Airlines LUV was referred to as "love" and Harley Davidson HOG was referred to as "hog," for obvious reasons. There was another.
If a trader said "copper," everyone knew that they meant Freeport-McMoRan FCX. Well, copper, the commodity, is a big deal now. How about "copper," the stock?
Recent Developments
Earlier this week, President Trump released letters addressed to at least 22 heads of state around the world increasing tariffs to 25% to 40% on imports from those countries on August 1 if there was no serious attempt made by those countries to come to some kind of acceptable deal beforehand.
The president also announced a 50% tariff on imported copper under section 232 of the 1962 Trade Expansion Act under national security concerns. On Wednesday, the president added that this increased tariff on imported copper would also be implemented on August 1.
The goal here is obviously to re-shore the copper supply, but as with all of this president's efforts to re-shore the means of production across all industries, for copper, there is the issue of limited domestic smelting capacity to deal with.
This will also likely hamper such industries as U.S. automobile manufacturers, U.S. appliance manufacturers and large defense contractors. Whether these tariffs, or this tariff in particular, stands as is will be interesting. There could be delays in the start date to allow these manufacturers more time to adjust. There could also be adjustments to the 50% rate. Similar section 232 tariffs on steel and aluminum are "only" 25%.
The Situation
Copper has historically driven between 75% to 80% of Freeport's total revenue. In 2024, that dropped to about 53%, which kind of makes the president's point seem more valid from a national security perspective. Gold drove about 14% of Freeport's revenue in 2024, while molybdenum drove about 4%. The remaining 29% of total revenue was driven by other metals, products and segments within the firm.
The largest share of Freeport's copper reserves (about 44%) are in North America, with the rest fairly evenly split between Indonesia and South America. Freeport is headquartered in Phoenix, Arizona. Key competitors in the copper space are BHP Group BHP, which is Australian; Rio Tinto RIO, which is British but mines for copper in Mongolia, Australia and the U.S.; and Southern Copper SCCO. Southern Copper is based in Phoenix, but 100% of its copper is imported from Peru and Mexico. It has no domestic operations.
For the sake of comparison, the S&P 500 is up 6.8% this year. Copper futures measured in the form of a continuous contract are up 37.2%. Over the past five sessions, the S&P 500 is up 0.8%, while copper futures are up 6.3%. Looking at the U.S.-based stocks over the past five days, FCX (mines more copper in the U.S. than anywhere else) is up 2.7%, while SCCO (mines all of its copper somewhere else) is down 4%.
The Chart
Readers will see FCX trading in a solid uptrend since bottoming in early April. The shares are now trading in the upper chamber of this Raff regression model. The shares have tested the upper trendline, which would be the pivot three times in recent days without breaking out. Relative strength is quite robust without being technically overbought.
The daily MACD is postured quite bullishly with the nine-day EMA above zero and with the 12-day EMA above the 26-day EMA with both of those lines well above zero. Additionally, the stock looks like it may experience a "golden cross" either on Friday or early next week. There are more than enough technical reasons visible to keep portfolio managers from reducing long-side exposure anytime soon.
My Plan?
If I can get some of these shares close to the bottom trendline of the model or the 21-day EMA, which is currently $43.80, then I think the shares would probably be worthy of an equity investment.
I also like FCX on momentum if a breakout should occur, but not in between either support or a breakout. I see FCX August 8 $44 puts quoted at $0.93 to $1.53. Not an active series, if I could write those for about $1.10 or more, I would have to seriously consider it.
At the time of publication, Guilfoyle had no positions in any securities mentioned.
