We recently compiled a list of the 8 Best Copper Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where Hudbay Minerals Inc. (NYSE:HBM) stands against the other copper stocks.
Overview of the Copper Supply and Demand
Copper is recognized as a critical metal due to its extensive applications, particularly in electrical wiring and renewable energy infrastructure. Prices of copper reached a record high during the first half of 2024, selling at $5.11 per pound on May 21, 2024. However, the price dropped slightly during the third quarter but remained elevated to its historic rates from the past two years.
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At the start of Q3, copper was priced at $4.42 per pound. It peaked at $4.65 on July 5 but then declined to a low of $3.95 by August 7. The third quarter ended with prices recovering to $4.50 on September 30.
There are several factors affecting the prices of copper. Firstly, the demand for this metal remains high, largely driven by sectors related to the energy transition, including renewable energy and electric vehicles (EVs). However, this demand coincides with a slowdown in the Chinese real estate sector, which is traditionally a major consumer of refined copper. Regardless of the challenges in the real estate market in China, the global demand for copper saw a slight increase of 2.5% in the first half of 2024. The growth was driven by notable demand from China of around 2.7% while other regions also witnessed demand growth of around 2%.
However, despite high consumption, the supply side outpaced the demand. According to a report by the International Copper Study Group (ICSG), there was a surplus of 535,000 metric tons (MT) through the first eight months of 2024. The global copper mine production remained elevated, increasing by 2% to reach 14.86 million MT from January to August 2024. Chile’s Escondida and Collahuasi mines remained key contributors while operations in the Democratic Republic of Congo and Indonesia reported 11% and 22% production growth, respectively. In addition to raw copper refined metal production also witnessed a 5% increase driven by expansion in China and the launching of new facilities in the Democratic Republic of Congo.
According to a report by Investing News Network, analysts believe that the primary reason behind higher prices during the first half of 2024 was not the fundamental supply-demand play, but was led by speculative investment. Analysts back this sentiment on the assumption that market participants would have taken a cautious approach following substantial gains in Q2 resulting in fluctuating prices of copper.
Looking ahead, the ongoing struggles in China’s real estate sector have dampened overall demand for copper. The government’s efforts to stimulate the market through various initiatives to boost housing projects are expected to revive global demand further. Moreover, energy transition efforts also continue to fuel demand for copper, the International Energy Forum estimates that approximately 1.1 new mines will need to come online annually until 2050 just to maintain current demand levels.
Our Methodology
To compile the list of the 8 best copper stocks to buy according to hedge funds, we used the Finviz stock screener and our previous articles. Using the two sources we curated an aggregated list of copper stocks sorted by market capitalization. Next, we ranked these companies based on the number of hedge fund holders as of Q3 2024, sourced from Insider Monkey’s database. The list is ranked in ascending order of the number of hedge funds.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An aerial view of a copper mine, showing the intricate workings of heavy machinery.
Hudbay Minerals Inc. (NYSE:HBM)
Number of Hedge Fund Holders: 35
Hudbay Minerals Inc. (NYSE:HBM) is a mining company that primarily focuses on copper production. It is one of the best copper stocks to buy according to hedge funds. The company operates several mines that extract copper, with Constancia Mine in Peru, Snow Lake Operations, and Copper Mountain Mine in Canada being the key contributors.
The company is strategically positioning itself for growth through a series of promising projects. For instance, its integration of the Copper Mountain mine is expected to significantly boost financial performance. By 2026, this acquisition is projected to contribute approximately $180 million in annual EBITDA. It also has several long-term projects in development, which advocate for its upcoming potential, such as the Copper World Project and Mason Project.
In addition to its projects, Hudbay Minerals Inc. (NYSE:HBM) maintains a prominent financial position. During the third quarter of fiscal 2024, it produced 31,000 tons of copper and 89,000 ounces of gold. The gold production was particularly noteworthy, exceeding expectations by 52% compared to the previous quarter. This increase was attributed to higher gold grades and improved mill throughput, especially at the New Britannia mill in Manitoba. On the copper front, the management cost-saving measures resulted in a dramatic decrease in cash costs per pound of copper from $1.14 in the second quarter to $0.18 in the recent one.
L1 Long Short Fund stated the following regarding Hudbay Minerals Inc. (NYSE:HBM) in its Q2 2024 investor letter:
“Hudbay Minerals Inc. (NYSE:HBM) (Long +31%) shares rallied over the quarter driven by rising copper and gold prices, as well as strong production results. The company’s first quarter results showed higher gold production and robust operating performance at both its major assets, which exceeded consensus expectations. In addition, the company announced a ~US$400m equity raise to support balance sheet de-leveraging and fund its key growth projects. Hudbay is a mid-tier mining company primarily producing copper, alongside gold and zinc, with its key assets located in Canada and Peru. We are attracted to Hudbay due to our positive medium-term outlook for copper and the company’s strong near-term free cash flow generation. This cash generation potential will allow the company to de-lever and recycle capital back into its highly prospective exploration program and major growth projects, most notably its Copper World project in Arizona.”
Overall HBM ranks 4th on our list of the best copper stocks to buy according to hedge funds. While we acknowledge the potential of HBM as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than HBM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.