If you think that the stock market is as low as it can get a viable investment option might be investing in copper stocks. If we look at how to invest 10 000 dollars in a possible recovery there are a variety of options. Investing in gold has been popular but gold will probably fall if the economy gets back on track. Investing in oil might be a better choice as a growing economy will typically drive up the demand for and price of oil. US traded stocks to watch include Freeport-McMoRan Copper and Gold – FCX, Southern Copper – SCCO, or Petaquilla Minerals Ltd.- PTQM (OTC). Freeport mines gold and copper while Southern Copper is solely a copper producer. Petaquilla has rights to potentially substantial copper deposits in the Central American country of Panama and is constantly dealing with issues such as environmental pollution and displacement of indigenous peoples on their Panama claims. When the world economy starts to recover copper is in demand. Copper futures are commonly seen as a bellwether of the global economy.
Investing in copper stocks at the start of a recovery can be attractive as copper mining stocks commonly rise faster than the price of copper in a bull market. Unfortunately, like all mining stocks, copper stocks also fall faster than the price of copper when the economy weakens. Investing in copper stocks requires sound fundamental analysis of both the global economy and of individual companies. For example, the third stock listed above, Petaquilla, could be a winner when they finally start extracting commercially viable quantities of copper and gold from the deposits in Panama. On the other they could also be easily shut down or at least delayed if popular sentiment against displacement of indigenous peoples prevails. Considering the still too recent market crash we should always pose the questions, what is a good investment and what are safe investments ? How does investing in copper stocks when we pose these questions?
One of the virtues of investing in copper stocks, investing in oil, or investing in consumer staples, like investing in beer , is that none of these stocks falls off the earth in a recession. There is always demand for their products. Investing in copper stocks and similar stocks works best when one buys at the bottom of an economic curve and sells at the top. The problem for the investor is picking the right time. Other indicators that might be useful today are the state of the European debt crisis, banks in general as reflected by ETF’s of preferred bank stocks, and the broad range of consumer stocks. If one of the European Union countries defaults on its national debt the effects certainly will affect European financial institutions and probably US institutions as well. If US discretionary spending picks up it could lead to a rebound of the US economy and that of the world. Investors watch the value of preferred bank stocks as a measure of confidence in US banks. Investing in copper stocks can be profitable if the investor times his purchases. As there is always demand for copper these stocks always have a market and when the economy rebounds investing in copper stocks could be quite profitable. As always we are not suggesting that the investor buy any of the stocks mentioned or that he ignore the opportunities inherent in investing in copper stocks. This article is presented as an exercise in thinking about profitable investing.