What We Said
By Jon Birger


(FORTUNE Magazine) - What We Said

As a way to ride the commodities wave, we named Phelps Dodge (PD $140) as one of our ten top stocks for 2006 in our recent Investor's Guide. The commodity we had in mind was copper, which had been rising sharply on demand from China and India. Phelps Dodge, we noted, is the world's No. 2 producer, and it traded at an attractive nine times the previous year's earnings.

What Happened

Shortly after we went to press, Phelps Dodge stock soared from $143 to a 52-week high of nearly $157. But on Jan. 10, PD announced a sharp drop in expected earnings for the fourth quarter, citing hedging losses--and production shortfalls. The stock fell 5%, to below $147, on the news; it has since dropped another $7. We still like copper--it's up 4% this year--and we still think Phelps is a well-run mining company and an underpriced stock. Phelps has a price/earnings ratio of nine, well below its ten-year average. Still, the hedging revelations make it clear that Phelps stock isn't a simple proxy for copper. If the company is hedging against lower copper prices, there's going to be less upside when prices rise. Top of page

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.