- Equities exposed to copper (HG1:COM) have enjoyed the metal's recent surge to nearly eight-year highs, but Morgan Stanley says there is more to come and a buying opportunity for investors may be around the corner.
- Despite average total shareholder returns of nearly 63% since the start of 2020, Stanley analysts say they continue to see a positive risk-reward for copper-exposed equities, citing various tailwinds including an accelerating economic cycle and expected reflation, which "strongly favors copper."
- Copper's role in the global shift toward a lower carbon economy is another bullish factor, the firm says, and its position as a key enabler of decarbonization and electrification transition offers a "compelling secular growth angle as investor focus on climate change continues to grow."
- "Against this backdrop, we would use potential market volatility around Chinese New Year over the next month as a buying opportunity with a bullish 2Q21 outlook in sight," the firm says, preferring Glencore (OTCPK:GLCNF, OTCPK:GLNCY), Lundin Mining (OTCPK:LUNMF) and First Quantum Minerals (OTCPK:FQVLF).
- Glencore and Lundin also trade at a significant discount, offering a valuation buffer if metals prices eventually pull back, while First Quantum also has "sufficient valuation headroom."
- London three-month copper inched higher in today's trade to $7,972/ton after recently cracking $8K/ton amid tight supply and robust demand.
- ETFs: COPX, JJCTF, CPER, JJC