We recently published a list of Billionaire Howard Marks’ Top 10 Stock Picks. In this article, we are going to take a look at where Freeport-McMoRan Inc. (NYSE:FCX) stands against other Billionaire Howard Marks’ top stock picks.
A decade of peerless returns. That’s what billionaire investor Howard Marks expects in the aftermath of Donald Trump’s assuming the position of the leader of the biggest economy in the world. He expects the US economy to remain the envy of the world and grow in strength with the slashing of red tape and easing taxes.
“Warren Buffett said it: don’t bet against the United States. He’s probably right about that,” the Wall Street veteran told the Sohn Hearts & Minds investment conference in Adelaide.
The remarks followed Trump’s big win against Democrat rival Kamala Harris, which ended up sparking a surge in stocks. Initially, US equities rallied to record highs as investors reacted to a potential slash in interest rates and taxes and an easing of regulatory pressure.
Fast forward, equities have pulled back significantly amid growing concerns about valuations. Worries that the Federal Reserve might not cut interest rates aggressively due to a potential spike in inflation on Trump tariffs have also left the markets on edge.
In mid-last year, the founder of Oaktree Capital Management raised concerns over high debt loads in private equity and real estate. Marks reiterated that the sectors would remain under pressure should interest rates stay higher for longer.
“The leverage, the use of debt to amplify your returns, has been the lifeblood of these two asset classes,” Marks said in an interview with Bloomberg. Amid growing concerns about the long-term impact of the high interest rate environment, Marks has moved to strengthen Oaktree Capital Management’s exposure in the energy sector. Energy holdings account for the most significant share of the hedge fund portfolio, having carried out significant changes in the third quarter of last year.
Increased focus on energy holdings does not come as a surprise. Marks is looking to take advantage of the growing demand for energy amid the artificial intelligence revolution. One of his energy holdings is already pushing for a deal with a tech giant that needs clean nuclear energy to power its data centres.
In addition to focusing on energy holdings, the founder of Oaktree Capital Management remains bullish about investment opportunities in China. Despite China’s slow recovery from the COVID-19 pandemic causing it to lose favor among investors, Marks sees numerous attractive investment opportunities still available.
“Clearly, China is on the pile of things that people feel ill about, and it’s on that pile that you find the bargains,” he said. “That doesn’t mean that you should buy everything on the pile, but that’s where you look for the castoffs and the bargains.”
The focus on Chinese equities does not come as a surprise, as Marks believes US equities are “high priced.” Therefore, bargains in China are more appealing. Consequently, the billionaire investor expects Chinese growth to exceed other countries in the near future, including the US.
Our Methodology
We scanned Oaktree Capital Management’s portfolio to make the list of billionaire Howard Marks’ top 10 stock picks. We then settled on the hedge fund’s biggest holdings and examined why they stand out as the top stock picks. Finally, we ranked the stocks in ascending order based on the hedge fund’s stake value.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Is Freeport-McMoRan Inc. (FCX) Among Billionaire Howard Marks’ Top Stock Picks?
Oaktree Capital Management’s Stake Value: $121.07 million
Number of Hedge Fund Holders: 74
Freeport-McMoRan Inc. (NYSE:FCX) is a basic materials company that mines mineral properties. It primarily explores copper, gold, molybdenum, silver, and other metals. The company is strategically positioned to capitalize on growing copper demand as the world shifts towards renewable energy and electrification.
The International Energy Agency predicts that by 2050, global copper demand will have increased by at least 60%. The red metal’s prices are expected to increase by over 40% over the next two years, according to analysts at Jefferies (JEF.N), which opens a new opportunity for growth. Freeport-McMoRan Inc. (NYSE:FCX) has long concentrated on copper production, accounting for 9% of global supplies and more than any other company. Now, it is in the unique position of being able to focus on growing the mines it already owns without being distracted by a buyout.
The company has been making notable progress, especially in Indonesia, where it explores copper, gold and silver properties. In line with earlier projections, the company recently started commissioning its new Indonesian smelter, indicating its dedication to value-added production and vertical integration. The company’s processing capacity is anticipated to increase as a result of the milestone, which might also strengthen its position in the local market. Strong commodity prices and operational efficiencies seem to be the main drivers of Freeport-McMoRan Inc.’s (NYSE:FCX) promising financial future. The business made $25.64 billion in sales over the previous 12 months, with a remarkable 41.28% gross profit margin. According to analysts, if spot prices stay high, the company could produce about $4.8 billion in free cash flow (FCF) in 2025.
Overall, FCX ranks 10th on our list of Billionaire Howard Marks’ top stock picks. While we acknowledge the potential of FCX to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than FCX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
