If an investor asks for advice on which stocks or sectors to focus on, his or her own opinions about markets and economics might shed light on opportunities. The expected transition to electric cars provides an example.
The International Energy Agency’s Global EV Outlook for 2023 includes this remarkable statement: “A total of 14% of all new cars sold were electric in 2022, up
from around 9% in 2021 and less than 5% in 2020.” The IEA estimates EVs could make up as much as 18% of worldwide car sales this year, while projecting a 35% share in 2030. That last estimate is based on current government policies.
Will those policies will change? Do you believe governments around the world will become more aggressive in their push for a transition to EVs? Or might they pull back?
If you expect the charge toward EVs to continue, one long-term investment focus can be stocks of copper miners.
Sam Peters, a portfolio manager at ClearBridge Investments in New York, summed up the long-term case for copper during an interview: “Every EV has about 200 pounds of copper. Electrifying the grid to charge all these cars overnight is very copper intensive. So you have huge draws on copper and very limited supply.”
Peters co-manages the ClearBridge Value Trust
LMNVX,
and the ClearBridge All Cap Value Fund
SFVYX,
He called Freeport McMoRan Inc.
FCX,
“the consensus go-to for copper bulls.”
“if you assume the EV build-outs that the policy makers want, you would be growing copper demand by three million to five million [metric tons] a year on a 25 million supply base,” Peters said. “It is not going to happen. Visible copper inventories can be tracked. They are as low has they have ever been,” despite the partial shutdown of China’s economy last year, he added.
Peters is also bullish on oil, especially companies involved in offshore drilling and related services.
Backing the long-term case for Copper, Jefferies analyst Christopher LaFemina estimated (using data from Wood Mackenzie, company filings and his firm’s own research) that global copper demand will increase at annual rates ranging from 1.9% to 3.7% from 2023 through 2030, while supply will grow at annual rates ranging from 0.7% to 2.7%.
LaFemina’s estimates for 2022 through 2030 point to a 21% total increase in demand, with an increase of only 16% for supply. He estimates a supply shortfall of 1.3 million tons in 2030.
You might not have to wait very long
Even though the case for copper is long-term, LaFemina has aggressive 12-month price targets for three copper miners.
He wrote that current share prices for the three copper miners listed below had “priced in” a copper price of $3.86 a pound — roughly the current level for front-month copper contracts
HG00,
But based on the companies’ average forward price-to-earnings ratios over the past 10 years and an increase in copper to $4.75 a pound, which he called “a bullish but not unrealistic scenario,” he set the following price targets, which are in local currencies where the stocks are listed:
| Company | Ticker | Country | May 8 price | Jefferies price target | Implied 12-month upside potential |
| Freeport-McMoRan Inc. |
FCX, |
U.S. | 36.56 | 60 | 64% |
| First Quantum Minerals Ltd. |
FM, |
Canada | 36.24 | 40 | 10% |
| Antofagasta PLC |
ANTO, |
UK | 14.70 | 22 | 50% |
| Source: FactSet | |||||
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Mining stocks tend to be volatile — this isn’t the type of investment to consider if you cannot wait through price swings
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