It appears that Warren Buffett is not the only investor who thinks that now is a good time to invest in energy stocks. Activist investor Carl Icahn added 4 million class B shares of Freeport-McMoRan Inc. (NYSE: FCX) to his stake, bringing his share total in the mining and energy company to 104 million.
Freeport’s stock has been hammered since posting a recent high of $39.30 in July of 2014. That was just before the bottom began falling out of the energy market, a market the company had just paid around $19 billion (including about $11 billion in assumed debt) to get back into with acquisitions of McMoRan Exploration and Plains Exploration & Production. The price of copper had already dropped by about a quarter from high of around $4.50 a pound in January 2011 to around $2.50 a pound in the summer of 2014, on its way to around $2.00 a pound recently.
The value of Freeport’s assets has plummeted, and there’s certainly blood in the streets. The question is whether the bloodbath has stopped or at least slowed to a few drops. Icahn owns about 8.3% of Freeport’s outstanding shares and reached a deal with the company last October to name two members to Freeport’s 11-member board of directors. The company had previously cut the number of board seats from 16 to nine at Icahn’s recommendation.
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The size of Icahn’s addition to his stake in Freeport is less important than the fact of it. Just about any way one looks at it, Freeport has a long way to go to recover its former luster. Earlier this week the company announced the sale of 13% in its Morenci mine for $1 billion, which the company said it will use against borrowings on its term and revolving loans.
In the noon hour Wednesday, Freeport’s shares traded up more than 15%, at $7.33 in a 52-week range of $3.52 to $23.97.
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