HISTORY: Southern Copper Corporation ("SCCO/NYSE") is one of the largest integrated copper producers in the world. They produce copper, molybdenum, zinc and silver. All of their mining, smelting and refining facilities are located in Peru and Mexico and they conduct exploration activities in those countries and in Argentina, Chile and Ecuador. Their operations make them one of the largest mining companies in Peru and Mexico. They might have the largest copper reserves in the world. They were incorporated in Delaware in 1952 and have conducted copper mining operations since 1960.
TECHNICAL: NOT ONLY we are approaching nice technical levels to look for short opportunities, i.e. 33.20 is 50% retracement and 35.25 a 61.8% of retracement level of the impulsive leg (from 42 to 25) AND price is testing declining trend-line.
FUNDAMENTAL: It seems that the fundamentals are also in favor of this trade. The slow down in China's growth and it's declining Copper import will support this idea. You could read more on this in (harrydent.com/unpublished/)
In addition to this, i) Southern has the highest price-to-earnings (P/E) ratio among its peer. This is a classic measure of “value,” showing Southern is currently not a good one. ii) Southern’s price-to-sales (P/S) and price-to cash (P/C) ratios — two other measures of valuation — are also one of the highest of all copper miners. iii) Again, Southern’s price-to-book value (P/B) is higher than each of its peers. In fact, it’s about 270% higher than Freeport-McMoRan’s and 825% higher than Sterlite, an Indian miner! iv) Southern’s debt-to-equity ratio, a measure of its debt load, is higher than any of its peers. It’s more than four-times worse than Freeport-McMoRan’s.
CONCLUSION: This is a long term trade, and it is most likely that this stock test the lows of 2009 below $10.
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The share may be heading for some downside as it hits resistance, and as Copper hits resistance simultaneously.. However, i have some comments. I noticed that you are comparing the company's valuation to other same industry companies, which is a good thing if you are choosing whats the best short or long according to your view about an industry. So i assume that your expectations is based on further long term under performance for copper price. Otherwise, I wouldn't call a stock overvalued because of its valuation compatred to others, i would look at the stock individually. One more thing, why you are looking for a $10 target?
HamedAghajani
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Thank you for your comment; My view/research around Copper has shaped after reading an article about China real state bubble (harrydent.com/unpublished/) on a pure technical basis, I would seek for a profit as the price hits the dashed blue line in the plot below:
However, IF the price breaks and closes below the Gray level, I wouldn't see any significant level until 9.70-10.20 levels. To make this more eye catching, I defined 10 as the final target of this 3-5 years bear market.
HamedAghajani
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The stop loss level would be trading above 40, though.
Technician
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I see, as far as i understood you are speculating on a major shift in china's economic consumption.
Technician
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Technical's precede the fundamentals. Do you remember this chart
Technician
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Or i would say: Technical's precede fundamentals(but not always)