Copper has been a hot topic in the stock market, and for good reason. As clean energy solutions continue to spread across the country, the demand for the electricity-conducting metal is growing dramatically. In fact, some experts suggest that copper demand will more than double by the year 2030.
If that proves to be the case, copper investors are in for significant gains. However, not all copper stocks are equal. Investors must compare their options when choosing the best copper stocks to buy.
What Is the Best Copper Stock?
With demand for copper expected to rise dramatically, countless investors may be looking for the best way to enter the market. However, not all stocks are equal, even when those stocks operate within the same sector. Investors must choose their investments wisely.
That can be difficult because, according to MiningFeeds, investors can choose from an extensive list of publicly traded copper companies. Here’s a list of some of the best copper stocks to buy:
- Freeport-McMoRan (NYSE: FCX)
- Fortescue Metals Group (OTCMKTS: FSUGY)
- BHP Group (NYSE: BHP)
- Southern Copper (NYSE: SCCO)
- Rio Tinto (NYSE: RIO)
1. Freeport-McMoRan (NYSE: FCX)
Best for: Value investors interested in long-term copper investments
Freeport-McMoRan is one of the largest copper miners in the world, but that’s not the only metal it focuses on. The company is also a major producer of molybdenum and gold.
After huge back-to-back years in 2020 and 2021, the stock has digested its gains over the past two years, down about 9% in 2022 and a bit over 2% year to date in 2023. This could be a needed pause that will draw in long-term investors before the stock begins another leg higher.
2. Fortescue Metals Group (OTCMKTS: FSUGY)
Best for: Risk-averse investors
Most experts tell investors to stay away from stocks that trade on over-the-counter markets because they’re typically small companies riddled with risk. Fortescue Metals doesn’t trade on the OTC market because it’s a small, risky company — it does so because it’s a foreign company headquartered in Perth, Australia. The company is one of the largest iron ore miners in the world.
So why is it on a list of the best copper stocks? Fortescue Metals is heavily exposed to the copper industry thanks to its approximately 25% ownership of Candente Copper Corp., which changed its name to Alta Copper Corp. in 2023. It’s also exploring new gold and copper assets of its own around the world.
As with most other copper stocks, Fortescue is currently digesting its huge gains from the 2018 to 2020 time period, down close to 5% thus far in 2023.
3. BHP Group (NYSE: BHP)
Best for: Income investors
BHP is the world’s third-largest largest mining company. The company’s core focus is on iron ore, but it’s also a major player in mining several metals, one of which is copper.
The company already has multiple copper mines around the world, but it’s looking to expand its presence in the copper mining industry as a shift in energy production leads to expected gains in demand.
The company is a solid dividend payer too. It has consistently paid dividends to investors since 1995 and shows no sign of changing that trend. The stock dividend yield is impressive too, currently sitting at 9.40%. It’s a strong option for income investors who want copper exposure.
4. Southern Copper (NYSE: SCCO)
Best for: Buy-and-hold investors looking for an international copper company
Founded in Delaware in 1952, Southern Copper has grown to own the largest copper reserves in the world. The company’s name comes from the location of its first assets, South America and Peru, and it continues to operate in that region.
Unlike some of its copper-related peers, Southern Copper has already begun spiking upward after a few years of consolidation, with shares up over 17% YTD in 2023. On top of those impressive, market-beating gains, the company pays a sizable 5.82% dividend.
5. Rio Tinto (NYSE: RIO)
Best for: Income investors seeking minimal stock fluctuation
Commodity-based stocks will never be as safe as a Treasury bill, but some of them can be less volatile than the overall market. Rio Tinto is a great example, as it has a beta of just 0.68, making it about 30% less volatile than the market as a whole. Over the past five years, the stock has only returned about 10%, but its fat dividend yield — currently 8.08% — has no doubt kept investors happy.
Should You Invest In Copper Stocks?
Whether or not you should invest in copper stocks depends on a number of variables, from your investment objectives and risk tolerance to the current construction of your portfolio. Generally speaking, most advisors suggest that the average investor dedicate no more than 5% to 10% of their portfolio to commodities like copper.
While the long-term fundamentals of copper appear to be strong, gains and losses in the industry often follow each other in rapid succession. Copper investors, like any type of commodity investor, often have to be nimble on their feet, even if they’re investing in one of the largest copper producers, such as Freeport-McMoRan.
But there’s also no denying that many copper producers throw off huge dividends to investors, which can make them appealing to income-oriented buyers.
How To Choose the Right Copper Stock
The best copper stock today might not be the best one tomorrow. Unlike many other industries, the winds of change blow constantly in the commodity space, and today’s winners may end up falling behind in the future as other producers have the right product mix, increase their efficiency or otherwise gain an edge on their competitors.
For many investors, taking a buckshot approach and owning a number of different names can help reduce risk, as can owning an exchange-traded fund like the largest in the sector, the United States Copper Index Fund (NYSE: CPER).
But if you’re looking for a specific type of name, such as the purest play in the industry or the one with the most sustainable dividend, you can research the names yourself or enlist the aid of a financial advisor to pick the right copper stock for you.
In the words of Warren Buffett, investors should be “fearful when others are greedy and greedy when others are fearful.” As copper stocks have for the most part turned in lackluster performances over the past few years, opportunities may be arising for long-term investors. If you’re looking for income and/or a rebound in the space, this could be a good time to consider an investment in the sector.
Data was compiled on June 4, 2023, and is subject to change.