This week, we can’t resist taking another bite at those highly oversold commodities markets. The fundamental story for the commodities boom is still in place, and we see no reason not to take further advantage of the market swoon.
As South America’s largest and most profitable copper producer, Southern Copper Corp (PCU, formerly Southern Peruvian Copper) is a mainstay in any Global Bull Market portfolio. PCU operates as an integrated producer of copper, molybdenum, zinc and silver. The Global Bull Market in commodities means that copper smelting plants are simply not producing enough to keep up with worldwide demand. And the skyrocketing copper price means that PCU is minting money. In late January, PCU reported a 42.5% jump in 2005 profits to $1.4 billion.
PCU is also a great income play. The company’s current quarterly dividend is $2.75 per share, which amounts to almost 14% on an annualized basis. But it’s better to think of PCU as a highly volatile play on the global copper price. And today, PCU is positioned for a strong bounce. A word of warning: if you watch it too closely PCU will give you vertigo. So if you can’t stand the heat (as in, drops of up to 20% in the stock price!), invest only half your normal position size.
So hold on to your hat, and buy PCU at market today. Give the stock some extra breathing room and place your initial stop at $61.50. For those who want to play options, buy the June $90 call options, PCUFR.X.
PORTFOLIO UPDATE
To make room for your shares of PCU, sell your shares in Teva (TEVA). It’s a reluctant sell, because Teva’s prospects are outstanding, and it is even more oversold than PCU. But as a fast-moving Global Bull Market trading service, we put your money to work where you can make the biggest, fastest profits.
Take your 77% profits on one half of your RTP options for a quick profit, but hold on to the rest. Move your stop up in RTP stock up to $172.
Korea’s Woori Financial (WF) soared 12% yesterday in the local Korean market on the back of reforms in the South Korean banking sector. Hold on for more upside.
Hold on to your Gold Fields (GFI) options for now — up 38% last week. Ditto for Latin American workhorse America Movil (AMX), which continues to deliver the goods, with the options we recommended up almost 40% since last Tuesday. You are also seeing strong profits in your holdings in China Petroleum & Chemical (SNP) options (up 41%) and Unibanco in Brazil (UBB) (up 32%) over the past two weeks.
Sony (SNE) sold off on Monday in Japan on reports that the launch of Playstation 3 will be delayed. Our view: a virtual non-event. Even if the rumors prove to be true, the Sony story is about much more than the Playstation. Take Peter Lynch’s advice and go into a Sony shop in your local mall this weekend. It’s hard not to be wowed by the wide range of Sony’s products, Apple iPod mania notwithstanding.
