Freeport-McMoRan

Methodology

Freeport-McMoRan's copper mining business exhibits extreme earnings volatility from copper price fluctuations, requiring normalized commodity assumptions for fair value. The company can swing from massive profits to losses based on global copper markets. Fair value calculations work best using mid-cycle copper prices ($3.50-4.00/lb) rather than spot prices driven by macro and supply shocks.

Methodology

Freeport trades at very low PEG ratios (often below 0.5x) during strong copper markets, reflecting market skepticism about price sustainability despite electrification demand tailwinds. Production growth remains modest from mature assets. PEG misleads for commodity miners because earnings volatility reflects copper price swings rather than operational improvements or reserve quality.

Methodology

Freeport pays dividends yielding 1-3% that vary with copper prices and uses excess cash for buybacks during strong markets, making PEGY more attractive than PEG. The company prioritizes balance sheet strength and opportunistic capital returns. Total shareholder yield increases meaningfully during copper upswings when special dividends and buybacks supplement base payments.