The article was written by Jacob Saphir, a Financial Analyst at I Know First.

FCX Stock Forecast

“We shall not cease from exploration, and the end of all our exploring will be to arrive where we started and know the place for the first time.” T.S. Eliot

Summary:

• FCX stock rose nearly 400%
• FCX has improved its fundamentals
• Rising commodity helped propel the company
• I Know First Algorithm Forecast

Background:

Freeport-McMoRan, Inc. (FCX), formerly known as Freeport McMoRan Gold & Copper, is a natural resource company.  Founded in 1987, the company is headquartered in Phoenix, Arizona.  The business focuses on the exploration and mining of natural resources worldwide for oil, natural gas, gold, silver, copper, and other minerals.  The company has an extensive portfolio of assets spanning 4 continents: Asia, North America, South America, and Africa.  Since the start of the year 2016, the company’s stock increased by nearly 400%.  So, how did FCX achieve this?  The company experienced favorable pricing of commodities, improving fundamentals, and debt restructure.

Improving Fundamental:

Net income has been rising each quarter since the start of the first.  Perhaps, one of the biggest reasons for its rise in net income is the reduction of cost of goods sold.  Since December 2015, we have seen costs of goods sold decrease each quarter from posting $7,443 million to $3,411 million. That is more than a 50% reduction in expense.  Also, net income has improved drastically from posting -$4,173 million in the first quarter of 2016 to posting its first positive net income of $217 at the end of the third quarter.  Moreover, operating cash flow increased each quarter since the end of the 4th quarter of 2015.  Thus, in its latest report, operating cash flow increased by 60%.  These fundamental improvements are the result of internal and external factors.

Rising Commodity Price

For the past three consecutive years, gold price has declined.  However, the year 2016 marked a turning point.  Gold closed as high as $1,368.30 per ounce on August 2.  That is nearly a 29% increase.  Along with gold’s increase in price, so was copper.  As we can see in the price below, the price for copper increased by over 30%.  Another commodity that also rebounded was oil.  In fact, oil rose from a low of $26.19 per barrel from January to $53.65 per barrel by the end of the year.

These contributed to increase in FCX’s revenue, thus increasing the company’s profit margin.  Its increase in net income along with its plan to reduce debt, helped propel the stock to increase by nearly 400% in the year 2016.  Some may say the increase in commodity price is the result of a weaker currency, on the contrary the US dollar increased compared to other currencies such as the Euro and the British Pound.

Source MacroTrends.com

Past I Know First Forecast Successes:

In such as the one dated on February 17, 2016, the algorithm accurately forecasted a bullish signal for FCX.  The stock increased by over 40% within its time frame of 14 days.

In another example, the algorithm accurately forecasted a bullish signal for FCX on November 27, 2016. The stock increased by over 17% in 7 days.

On January 18, 2017, I Know First algorithm released the following forecast below.  If we were to compare the forecast back in February 17, 2016, we can see both forecasts rate FCX as a buy.  If the previous forecast accurately predicted the stock would increase and it did by over 40%, the latest forecast below could indicate future increase in the stock’s value.

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.