Much has been written lately about the volatility in the price of precious metals and what they might be telling us about the future of the dollar as the world’s reserve currency. The conversation around industrial metals, essential to the world’s economic growth, has been more subdued. Yet, as global electrification and the reshuffling of supply chains continues apace, investors might want to look at some of the companies benefitting from these trends. 

As the second largest mining company in the world by market capitalization ($176 billion), Southern Copper Corp. (NYSE: SCCO) operates copper mines, smelters, and refineries primarily in Peru and Mexico, but is headquartered in Phoenix, Arizona. 

The copper it produces is essential for electrical systems, construction, transportation, and electronics because of the excellent electrical and thermal conductivity the metal offers. As both developed and emerging economies around the world electrify and build physical and digital infrastructure, the demand for copper is increasing. Since our upgrade from HOLD to a BUY rating on July 18, 2024, the stock has gained 86%, signaling strong market confidence in the company's fundamentals. 

Some key financial factors worth highlighting:

• Revenue grew 15% last quarter and 23% over the last three years.
• The company’s margins have expanded meaningfully in the last year, including a four-point jump in operating margins to 50%.
• The company’s return on equity in the last 12 months was almost 37%, and its returns on invested capital were 35%.
• Free cash flow increased by 66% in the last three years, which is remarkable in such a capital-intensive industry as mining.
• The company’s debt, accounting for 42% of total capital, looks sustainable, especially considering that interest expenses are running at under 10% of operating cash flow.

The company’s strong fundamentals are supported, in the short term, by a very strong Sentiment score of 9.3 (out of 10). Our Sentiment score, made up of four individual indicators designed to measure short-term demand for the stock and overall investor “sentiment” about the shares, is designed to complement our fundamental analysis for investors wanting to avoid buying high quality companies that might be out of favor in the short term. 

SCCO is also included in some of our best lists of ideas, such as our Best Growth stocks, Best Momentum stocks, and Improving Earnings Guidance stocks.

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