This Commodity Is Heading for an Upswing – Buy the Industry Leader

Traders are starting to bet more on a soft landing for the economy, rather than a heavy recession. That’s good news. It also means that some sectors should perform better than expected in the months ahead.

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  • One area is construction. From increased infrastructure spending to a housing boom, there are plenty of ways to play the trend. The top way is to invest in commodities that rise in response to a strong economy.

    The key commodity is copper. The metal’s relatively low cost and utility for a variety of purposes makes it a solid indicator as to the performance of the economy.

    In the copper mining space, Freeport-McMoRan (FCX) is the leader. Shares have already started trending higher in the past few weeks. But there’s likely more upside ahead.

    That’s because the company has the strongest balance sheet in the sector, and has a history of returning capital to shareholders when copper prices boom.

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  • Action to take: Investors should consider shares at current prices, or on any drop lower. Freeport currently pays a 1.5 percent dividend, about one-third of earnings. That payout should increase with profitability.

    For traders, the August $45 calls, last going for about $0.95, could see mid-double-digit returns as shares continue to rally over the summer.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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