FCX had a nice move higher recently and may be in the process of retracing that advance. Take a look at the three-month chart below, which also gives us a view of the simple 50-day moving average.
The 50-day moving average price as of July 6 is just above $34. The most recent low was $31.41 on June 26.
A 50% price retracement from the July 5 intraday high of $36 from the June 26 low would bring the price of FCX down to $33.71, which would be a reasonable entry target price.With the current (and recently raised) annual dividend of $1.25, that would bring the yield-to-price up to 3.7% if we could buy FCX at $33.71. After all, it's the world's largest copper producer and it produces more than 20% of its earnings from its gold production. Both copper and gold will feel the effect of global monetary easing and economic stimulation programs. With $4 billion of levered free cash flow (trailing 12 months) and a payout ratio of just 37%, the dividend at FCX is well covered. The fact that the stock is selling at a current P/E ratio below 9 and a forward P/E ratio below 7 reminds us that it's trading at the low end of its 52-week range. Goldcorp (GG), which claims to be "...the fastest growing, lowest cost gold producer...," is selling for less than 12 times forward earnings. As Casey Research recently stated in its Big Gold report: "There are many reasons why we like GG -- low cash costs, low political risk, and the biggest projected growth of the seniors -- and here's another one. "Check out how well management has grown cash flow over the past five years. This trend will continue a result of both greater production and rising gold and silver prices." See the chart below. As the chart dramatically demonstrates, GG knows how to improve cash flow per share. GG will discuss second-quarter results on July 26 along with a conference call. From its recent low of $32.16 on May 16 it rallied to $40 and may now also be correcting and retracing that price path. A 50% retracement from its June 14 high of $40.44 would bring the price to around $36.30. It closed July 6th at $37.76. Like the 30 stocks that make up the Dow Jones Industrial Average as represented in the SPDR DJIA ETF (DIA), FCX and GG will spring back to life after the current market bloodbath has run its course. Calmer heads will eventually prevail, and those who accumulate these great stocks while "the blood is running in the streets" will be nicely rewarded before 2012 comes to a close. This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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