Commodities & Metals

Goldman Sachs Says Yes On Metals & Mining: Growth Vs. Value (FCX, AA, CENX, RS, WOR, XME, COPX)

Is the world economy slowing or are we at the trough?  It depends upon whom you ask.  A report today from Goldman Sachs is highlighting the great value in the metals and mining sector noting that global metal demand is likely to remain fairly healthy.  The driver of course is emerging markets.  The larger issue is that this generally seems to be a more of a valuation call than a growth call.

Goldman Sachs’ research team noted that the most recent price drop in many of the metals and mining shares has created very attractive entry points for many of the best stocks in the sector.  The firm is remaining bullish on copper fundamentals, which is hard to say is a value call.  To be bullish on copper almost always translates back to the global growth trade.

Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) was reiterated as a “Buy.”  Goldman is less aggressive on Aluminum, but has some bright spots.  Alcoa Inc. (NYSE: AA) was reiterated as “Buy” as a move away from the linkage to spot aluminum prices due to strong aerospace business opportunities coming down the pipe in the years ahead.  Freeport-McMoRan shares are up 3.75% at $48.35, bot bad for a $45 billion market cap.  Alcoa is up almost 4% at $12.84 this morning.

Century Aluminum Co. (NASDAQ: CENX) was raised to “Neutral” from “Sell,” but it needs to be noted that the target went to $11.50 from $14.50 before; the 52-week range is $8.72 to $20.76.  Shares are still up 5% at $12.38 on the news.

Reliance Steel & Aluminum Co. (NYSE: RS) was raised to “Buy” from “Neutral,” but the price target was taken to $52 from $60 against a 52-week range of $36.62 to $60.60. Reliance shares are up a sharp 5% at $43.26 this morning.

Worthington Industries, Inc. (NYSE: WOR) in steel and metals processing was not given the same love.  Goldman Sachs cut the rating there to “Sell” from an already cautious “Neutral” rating.  Worthington shares are down 2.5% at $16.28 on the call and the 52-week range is $14.07 to $23.75.

The key ETF is on the move too.  The SPDR S&P Metals & Mining (NYSE: XME) is up 1.8% at $59.66 and its 52-week range is $47.31 to $77.44.  In copper mining ETF trends, the Global X Copper Miners ETF (NYSE: COPX) is up over 3% at $17.15 against a 52-week range of $12.35 to $20.98.

JON C. OGG

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