For Immediate Release Chicago, IL – January 14, 2016 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Compañia de Minas Buenaventura S.A.A. (BVN), HudBay Minerals, Inc. (HBM), Teck Resources Ltd. (TCK), Rio Tinto plc (RIO) and Vale S.A. ( VALE). Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free. Here are highlights from Wednesday’s Analyst Blog: 5 Stocks to Dump as China Crumbles The rough start to the year for the China stock market as well as weak factory and service sector activity surveys has led to copper plunging to a six-year low of $1.97 a pound on Monday. On Jan 11, Chinese shares plunged again. The Shanghai Composite Index dropped 5.3% to a three-and-a-half-month low at 3,016.70. The Index has shed 15% so far this year. The CSI 300, a combination of the 300 biggest companies on the Shanghai and Shenzen markets, was also down a little over 5% for the day. The losses came on the heels of two days of stock exchange suspension last week and weak manufacturing data. China manufacturing purchasing managers’ index (PMI) declined to 48.2 in December from 48.6 in November, according to Caixin Media Co, the 10th straight month of a below 50 reading. Chinese Caixin services PMI came in at 50.2 in December from 51.2 in November. The December number was the lowest in 17 months. It wasn’t a surprise that the downslide in the Chinese markets created a havoc in copper prices, one of the most economically sensitive metals, which now languishes at a six-year low. Given its widespread use in the communication, transportation, manufacturing and construction industries, copper is often considered as a gauge of economic health. With only 4% of approximate global copper reserves, China solely accounts for around 45% of global copper consumption. China’s rapid expansion had once led to a frenzied demand for the metal, which has now cooled off due to mounting worries about the country’s economic health.
China has been the biggest importer of copper but they’ve steadily declined in 2015. The automobile sector is a major consumer of copper products and, according to estimates, copper content in an average mid-sized vehicle totals approximately 50 pounds. Vehicle sales in China, the world's largest car market, hit a three-year low in the wake of the economic downturn and volatile stock markets. As per data issued by the China Association of Automobile Manufacturers, a total of 24.60 million cars were sold in 2015, up 4.7% year over year, a marked slowdown from the 6.9% rise in 2014. The weakness in China’s automobile sector is a matter of concern for copper producers. China’s soft property market is also affecting copper demand.
In 2015, the red metal lost 25% of its value amid concerns about Chinese economic growth rates, apprehensions surrounding Europe, continued U.S. dollar strength and the perennial problem of oversupply. Copper has lost more than 9% of its value so far this year. Henceforth, copper prices would depend on the prevailing demand and supply situation. The International Copper Study Group (ICSG) expects a small deficit of around 130,000 tons in 2016 as demand growth outpaces production growth. Earlier, at its April 2015 meeting, ICSG had guided a surplus of 360,000 tons and 230,000 tons for 2015 and 2016, respectively. Although a downward revision has been made to global usage in view of lower–than-anticipated growth in China, larger downward adjustments have been made to production as a result of recent announcements of production cuts.
While some companies like Freeport-McMoRan and Glencore are announcing production cuts, Rio Tinto and BHP Billiton (separately and in joint ventures) plan to mine millions of additional tons of copper. They are amassing vast copper holdings to capture a greater chunk of the $140 billion global market in a bid to eventually squeeze out high-cost producers just as they did in the global iron ore business.
Additionally, geopolitical tensions, especially in the Middle East, along with the currency war initiated by China, could lead to a stronger U.S. dollar in 2016. It is a well known fact that copper has a negative correlation with the greenback. So, a further rise in the dollar could lead to more weakness in copper prices.
Due to the recent crash in copper prices and the weakness ahead, we would recommend investors to get rid of five copper stocks at the moment. These stocks that have a bearish Zacks Rank #4 (Sell) or #5 (Strong Sell) and have witnessed downward estimate revisions over the past few weeks. They’ve also delivered miserable losses on the bourses.
Compañia de Minas Buenaventura S.A.A. (BVN)
Headquartered in Lima, Peru, Compañia de Minas Buenaventura S.A.A., a precious metals company, engages in the exploration, mining and processing of gold, silver, lead, zinc and copper metals in Peru.
This Zacks Rank #4 stock has lost 7.01% of its value in one week, delivering a negative year-to date return of 3.97%. The company recorded negative earnings surprises in three of the last four quarters, with an average miss of 433.93%. The Zacks Consensus Estimate for both fiscal 2015 and 2016 has undergone negative revisions over the past 60 days. The Zacks Consensus Estimate is currently at a loss per share of 1 cent for fiscal 2015 and 9 cents for fiscal 2016.
HudBay Minerals, Inc. (HBM)
Headquartered in Toronto, Canada, HudBay Minerals Inc., an integrated mining company, which together with its subsidiaries, mainly focuses on the discovery, production, and marketing of base and precious metals in North and South America. It produces copper concentrates containing copper, gold, and silver; and zinc metal.
This stock has plunged 26.09% in the past week and 24.35% in the year-to-date frame. This Zacks Rank #5 company has missed the Zacks Consensus Estimate in three of the last four quarters, with an average miss of 97.16%. Moreover, the Zacks Consensus Estimate for fiscal 2015 and fiscal 2016 has moved south 18% and 2%, respectively, over the past 60 days. Teck Resources Ltd. (TCK)
Vancouver, Canada-based Teck Resources explores, develops and produces natural resources in the Americas, the Asia Pacific, Europe and Africa. Its main products include copper, including copper concentrates and cathode copper; steelmaking coal; and refined zinc and zinc concentrates.
This stock has lost 18.73% of its value in the past week with a negative year-to-date return of 23.58%. It carries a Zacks Rank #4.
Moreover, the Zacks Consensus Estimate for fiscal 2016 has moved south by 14% over the past 60 days. The company holds a negative earnings growth estimate of 48.03% for fiscal 2015 and a projected decline of 46.93% for fiscal 2016.
Rio Tinto plc (RIO) A subsidiary of Rio Tinto Group, Rio Tinto plc finds, mines and processes mineral resources. The company mines and produces aluminum products, aluminum, copper, gold, silver, and molybdenum, as well as nickel, diamonds, titanium dioxide feedstocks, borates and salt. It also produces high purity iron, metal powders, zircon and rutile; thermal coal, coking or metallurgical coal and uranium; and iron ore. It has operations in Australia, North America, Asia, Europe, Africa and South America.
This Rank #5 stock has lost 12.92% in the past week with a negative year-to-date return of 15.04%. The company also has a negative earnings growth estimate of 48.54% for fiscal 2015 and an expected decline of 28.39% for fiscal 2016. Moreover, the Zacks Consensus Estimate for fiscal 2015 and fiscal 2016 has gone down by 1% and 4%, respectively, over the past 60 days.
Vale S.A. (VALE)
Headquartered in Rio de Janeiro, Brazil, Vale S.A., along with its subsidiaries, engages in the research, production and sale of iron ore and pellets, nickel, fertilizer, copper, coal, manganese, ferroalloys, cobalt, platinum group metals and precious metals in Brazil and internationally.
Vale has plunged 19.62% in the past week and 22.80% so far this year. The earnings growth estimate of this Zacks Rank #4 stock is a negative 128.20% for fiscal 2015. Moreover, the Zacks Consensus Estimate for both fiscal 2015 and fiscal 2016 have gone southward over the past 60 days. The Zacks Consensus Estimate is currently at a loss per share of 24 cents for fiscal 2015.
Bottom Line
Exiting certain underperformers at the right time helps to maximize portfolio returns. With copper prices at a six-year low and volatility in the Chinese markets, we believe it will be a prudent move to get rid of these stocks at the moment.
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BUENAVENTUR-ADR (BVN): Free Stock Analysis Report
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VALE SA (VALE): Free Stock Analysis Report
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