Topic: Energy Stocks

Commodity stocks: Profit from a powerful upswing in copper

Copper continues to attract a lot of attention from investors in commodity stocks. That’s because the metal recently hit an all-time high of $4.62 U.S. a pound. That’s up sharply from its low of $1.25 U.S. in late 2008. Right now, copper trades at around $4.47 U.S. a pound.

Traditionally, investors have bought copper as a way to profit from general economic growth. That’s because, unlike gold, silver and many other precious metals, copper has a wide range of industrial uses. For example, it’s a key element in electrical wire and pipe.

Higher copper will brighten this commodity stock’s prospects

We think copper could well move higher as the global economy continues to recover. As well, demand from fast-growing countries like India and China continues to rise. Right now, China is the world’s biggest copper consumer, accounting for about 40% of world copper demand. As the Chinese economy grows and more Chinese consumers achieve a higher standard of living, demand for the metal could move higher.

A continued rise in copper prices would benefit Teck Resources Ltd. (Toronto symbol TCK.B). We updated our buy/sell/hold advice on the stock in the latest issue of The Successful Investor.

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Teck: Much more than a copper producer

Apart from copper, Teck produces a wide range of other minerals, such as metallurgical coal (which is used in steelmaking), zinc, gold and molybdenum. It also holds interests in a number of western Canadian oil-sands projects.

Still, copper accounted for 30.3% of the commodity stock’s revenue in 2010, and 33.0% of its earnings. Teck produced 313,000 tonnes of copper in 2010, up 1.6% from 308,000 tonnes in 2009.

All of the commodity stock’s mines and projects are in stable countries. This, along with the wide range of metals it produces, helps cut its risk.

Aside from copper, Teck is seeing stronger demand and rising prices for its other commodities, including zinc and lead. As a result, its earnings rose 61.3% in 2010, to $1.5 billion from $924 million in 2009. The commodity stock’s earnings per share rose 51.4%, to $2.62 from $1.73. These figures exclude unusual items, such as gains on asset sales. Revenue rose 21.7% in 2010, to a record $9.3 billion from $7.7 billion.

Rising copper is certainly a plus for Teck, particularly if it signals a continued economic recovery. We’ll continue to monitor the company’s progress, and update our buy/sell/hold advice as necessary, in our Successful Investor newsletters and weekly hotlines.

You can get our in-depth analysis, including our clear buy/sell/hold advice, on Teck and 21 other Canadian stocks you may be considering buying in the latest issue of The Successful Investor. What’s more, you can get this issue absolutely free when you subscribe today. Click here to learn how.


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