Why Freeport-McMoRan Lost 11% Of Its Value In A Month?

Freeport-McMoRan stock (NYSE: FCX) has dropped almost 11% in the last one month and currently trades at $37 per share. The decline in the stock was mainly due to weakness in commodity prices. Faster economic recovery expectations, lifting of lockdowns, and successful vaccine rollout has led to a drop in global gold prices. The price of gold has dropped from over $1,880/ounce a month back to $1,775/ounce currently, marking a decline of more than 5.5% in the last one month. Additionally, copper prices have also declined over the last month from over $4.60/pound to $4.20/pound currently, marking a decline of 9% in a month. This was driven by China’s decision to crack down on rising commodity prices. The market expects China to release state reserves of copper while also possibly trimming long positions and cracking down on speculative activity. FCX gets all of its revenue from gold and copper and thus a drop in price of both these commodities has led to the stock seeing a decline of close to 11% in its value. But will FCX’s stock continue its downward trajectory over the coming weeks, or is a recovery in the stock more likely?

According to the Trefis Machine Learning Engine, which identifies trends in a company’s stock price data for the last ten years, returns for FCX stock average close to 11% in the next three-month (63 trading days) period after experiencing an 11% drop over the previous one-month (21 trading days) period. But how would these numbers change if you are interested in holding FCX stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning to test FCX stock chances of a rise after a fall and vice versa. You can test the chance of recovery over different time intervals of a quarter, month, or even just one day!

MACHINE LEARNING ENGINE – try it yourself:

IF FCX stock moved by -5% over five trading days, THEN over the next 21 trading days, FCX stock moves an average of 1.8 percent, with a 51% probability of positive return over this period.

Some Fun Scenarios, FAQs & Making Sense of FCX Stock Movements:

Question 1: Is the average return for Freeport stock higher after a drop?

Answer:

Consider two situations,

Case 1: Freeport stock drops by -5% or more in a week

Case 2: Freeport stock rises by 5% or more in a week

Is the average return for Freeport stock higher over the subsequent month after Case 1 or Case 2?

FCX stock fares better after Case 2, with an average return of 1.7% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 3.7% for Case 2.

In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.

Try the Trefis machine learning engine above to see for yourself how Freeport stock is likely to behave after any specific gain or loss over a period.

Question 2: Does patience pay?

Answer:

If you buy and hold Freeport stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.

Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!

For FCX stock, the returns over the next N days after a -5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500:

Question 3: What about the average return after a rise if you wait for a while?

Answer:

The average return after a rise is understandably lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks – although FCX stock appears to be an exception to this general observation.

FCX’s returns over the next N days after a 5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500:

It’s pretty powerful to test the trend for yourself for Freeport stock by changing the inputs in the charts above.

While FCX stock may have moved, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how the stock valuation for Compass Minerals vs Southwest Gas shows a disconnect with their relative operational growth. You can find many such discontinuous pairs here.

See all Trefis Price Estimates and Download Trefis Data here

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