MARKET SIGNALS 07.21.2020
Today we will look at one debt security as investment ideas for this week: Freeport-McMoRan Inc
IDEA #1: Freeport-McMoRan Inc
Against the backdrop of storming 18-month highs in copper prices, we decided to pay attention to one of its largest producers — Freeport-McMoRan Inc. The company’s capitalization has fully recovered from the consequences of the current crisis. A role in this was played by the fact that the company is a gold producer, which is also in great favor with investors lately.
The issue of the company with maturity in 2034 feels great too. It not only recovered to the levels preceding the March collapse, but also outperforms the LF98TRUU index, which tracks international high-yielding dollar corporate Eurobonds. However, there is still a certain potential for price growth in output in terms of the size of its credit spread, which is now 90 bp. n. exceeds its levels at the end of February.
Last week, the issuer placed two issues — with maturities in 2028 and 2030. To reduce the duration, we recommend shifting from FCX 2034 (duration 10 years, z-spread 413 bp) to an issue maturing in 2028 (duration 5.4 years, z-spread 375 bp).
Joint Managing Director