PCU

[Melf Elf]

Hi Melf 

Although their names are very similar, PCU (Southern Peru Copper) and CUP (Peru Copper) are completely different companies. PCU will have revenues of about $5.47 B in 2006. PUC will have $0 in revenues  PUC isn't mining anything yet, but it is a $389 M market cap.

So it's not surprising to see PUC's recent price action:

David,

Right.

Several sessions ago, when CUP was at the top of the Falling Wedge, it had a chance of an upside breakout, and a chance to catch a  rally, "in sympathy" with the sector.

I'll be interested to see if CUP can find support at the bottom of the pattern, then breakout above its recent high of 4.05, and rally with PCU.

If CUP had banged off the bottom of the pattern and did something like ralliy on a Bullish Engulfing pattern on Friday, that would have looked decent.  Instead, it closed below the pattern, by two cents, and the tail on the candle isn't nearly long enough for a Bullish Hammer, so CUP isn't looking so good at the moment. 

The technicals look very weak, though. MACD rolled over and crossed its signal line, from below zero, along with the 50/200DMA Bearish Cross.

The weak technicals, particularly the rollover and Bearish Cross of the 50/200DMA, which are at the top of the Falling Wedge, make it tough going for CUP.  It would need to breakout and take out the recent high of 4.05 to show any upside potential.

Bottom line: Sorry that I wasted your time, David, looking at CUP. 

CUP closed below pattern support on Friday.

PCU found support again at the July high of 49.675 on Friday.

So, at the moment, the only thing similar about these two stocks is the sector and the anagram. 

[David Randolph]

The news out today on the copper mining industry was spectacular: Freeport-McMoRan Copper & Gold to Acquire Phelps Dodge, Creating the World's Largest Publicly Traded Copper Company

$26 B takeover to create the largest copper mining company in the world. This will certainly put everyone's eyes on the copper mining industry, and they will surely like what they see, since this is probably the most undervalued sector currently trading on the market.

Anyway, probably PCU will come down a bit to close the gap opened at $50.70 - $51.28. But I don't mind these short term girations as I will hold the stock for longer term purposes.

[David Randolph]

"This will certainly put everyone's eyes on the copper mining industry, and they will surely like what they see, since this is probably the most undervalued sector currently trading on the market."

David,

Would the same apply for GOLD??
It seems to be getting ready for another run..

http://wallstreetwindow.com/buffett.htm?gclid=CL7qmfydpYgCFR7TJAodIFTk5w

thanks,
mexirafa

[David Randolph]

David,

Would the same apply for GOLD??

Although I'm a long term bull on gold since August 2001, I think gold mining companies are overvalued. The play on gold stocks would be much different from a copper stocks play. What I mean is, copper can just stay here and you will probably see copper mining stocks rise 100%. For gold mining companies to rise 100% (as a group) probably gold futures would need to go to $1,000 an ounce, because their valuations are already pricing in a much higher gold price.

The Copper industry is trading at 8 times earnings and 1.22 revenues. The Gold industry is trading at 32 times earnings and 12 times revenues. Yet, Copper prices rose more than Gold prices in the past 3 years and probably this Copper outperformance will continue. I think you get the point.

You really need to be a big bull on gold prices to buy gold mining companies at this point. The risk is higher than the potential reward.

[tokyopua]

David,

Would the same apply for GOLD??

Although I'm a long term bull on gold since August 2001, I think gold mining companies are overvalued. The play on gold stocks would be much different from a copper stocks play. What I mean is, copper can just stay here and you will probably see copper mining stocks rise 100%. For gold mining companies to rise 100% (as a group) probably gold futures would need to go to $1,000 an ounce, because their valuations are already pricing in a much higher gold price.

The Copper industry is trading at 8 times earnings and 1.22 revenues. The Gold industry is trading at 32 times earnings and 12 times revenues. Yet, Copper prices rose more than Gold prices in the past 3 years and probably this Copper outperformance will continue. I think you get the point.

You really need to be a big bull on gold prices to buy gold mining companies at this point. The risk is higher than the potential reward.

You sure had some great mining picks before David, I know you know your metals!  EZM, DEZ were a few I recall did really well.  I missed entry to PCU, but will try to get in if the gap fills.

Speaking of EZM, do you have any thoughts on LMC?  It is apparently EZM merged with a nickel mining company, Cramer was quite bullish on it recently.

[David Randolph]

You sure had some great mining picks before David, I know you know your metals!  EZM, DEZ were a few I recall did really well.  I missed entry to PCU, but will try to get in if the gap fills.

Curiously EZM and DEZ were both bought or merged, as they're not trading anymore

The good thing about a $50 stock like PCU is that you have time to get in and out ... you don't have to be a day trader or johnny on the stop to trade this stock successfully, I believe.

Speaking of EZM, do you have any thoughts on LMC?  It is apparently EZM merged with a nickel mining company, Cramer was quite bullish on it recently.

No, I currently don't have any thoughts on LMC, but I will, no doubt about that. You gave me the third stock to analyze tomorrow, those are ASPV, IMOS and LMC (I also need an airline, I think I'll pass IMOS as the chart looks dead for now).

Coming back to PCU, I was a bit surprised to see it up 2.18% today, after yesterday's black candlestick. I don't know what's going to happen, but I think this stock will be a $100 stock in a year, and not every gap gets closed.

[David Randolph]

Copper future is building a base just after breaking down a support area. Usually when a medium term support is broken on the downside but the price holds just below support, many times it means it was a false breakdown and a powerfull short covering rally will push it back up above support:



If $Copper closes back above $320 as I think it will, surely PCU will make a move above its all time high of $58.38.

Anyway, this stock shows a 10% dividend yield, 8 times trailing earnings, strong demand and price increases for its product, what more can an investor hope for?

Nothing, I think. PCU will be a $100 stock in no more than a year.

[David Randolph]

Since copper futures are traded in US dollars, as gold futures, they tend to benefit when the dollar falls, because they become cheaper for foreign investors. The metal gets more attractive solely due to a currency issue and global investors bid it up.

Copper futures went as high as $324.5 on Friday's session but closed the day unchanged at $313.6. Technically it is important for the bull case to make it close above $320, previous support, now resistance. Well, this was just the first try from the bulls, I think they will try some more times until they ultimately breakout above $320.



PCU is probably one of the stocks with the highest dividend yield, lowest PER and highest growth rate in the entire US stock market. I'll continue holding it.

[David Randolph]

Well, this was just the first try from the bulls, I think they will try some more times until they ultimately breakout above $320.

Well, yesterday $copper closed at $321.55, up 2.54%. This will probably force shorts to cover all the way up to the $390 high. PCU will benefit from this and break above the $58.38 high.

I'll continue holding PCU.

[David Randolph]

Nothing new on PCU, not in technical or fundamental terms. I'll patiently continue holding the stock.

[nullzero]

Decent day today for PCU up over 2%.

[David Randolph]

Decent day today for PCU up over 2%.

Yes, decent. Opened a little gap at the open, between $53.45 and $53.55 and volume was below average, but, closing above the $54 resistance level is what really matters, I guess.

This is a 10% dividend yield, 8 times earnings stock. It could double and would still be cheap, given its growth rate.

Just watch this $16 B mammoth go up 100%, not in one day or one week, but almost for sure !

[David Randolph]

PCU opened with a gap up, came down to close the gap and test the new $54 support (prior short term resistance) and closed at $54.36. $Copper rose 1.28% yesterday to $319.55. I would like it to close above $330 to get a clear bullish signal - I'm sure this would put PCU on fire !

I'll continue holding PCU.

[David Randolph]

A bit of an intraday sell off on PCU, but still managed to close above $54, which I welcome. $copper went down 0.74% to $317.2.

Nothing new on the technicals or fundamentals, I'll keep on holding PCU.

[David Randolph]

Look at this giant, slowly but surely, moving towards a new all time high. No press releases for almost a month now. I don't have a problem with that.

PCU is showing a profit of 9% to the 3 Stocks on Fire Portfolio, I will keep on holding it.