There are two main reasons insiders invest in their own companies. They either believe that business is about to get better, or that the company is undervalued. Whatever the reason, insider buying tells us that those within the organization expect the share price to rise.
In this report, we are going to highlight a large insider purchase at Freeport McMoRan Inc (FCX:US). Freeport McMoRan is an American mining company that predominantly produces copper, gold, and molybdenum. Headquartered in Phoenix, Arizona, it has assets across North America, South America, and Asia. It is listed on the New York Stock Exchange and currently has a market capitalization of $40.58 billion.
Insider buying at Freeport McMoRan
Our data shows that on August 29, Freeport McMoRan board member Ryan Lance picked up 31,000 FCX shares at a price of $31.88 per share. This trade cost the insider $988,314 and increased his holding to 32,132 shares.
Largest insider purchase since 2019
Mr. Lance has considerable industry experience. Currently, he is Chairman and CEO of ConocoPhillips, one of the world’s largest independent exploration and production companies. In his previous roles at ConocoPhillips, he was responsible for international exploration and production, technology, major projects, downstream strategy, integration, and specialty functions. Given his background, he is likely to have good insight into Freeport McMoRan’s prospects.
What stands out here is the size of the purchase. Our data shows that Mr. Lance’s $988k buy is the largest insider purchase at Freeport McMoRan since June 2019. The fact that the insider has committed so much capital to the stock suggests that he is very confident it’s undervalued right now.
Freeport McMoRan faces uncertainty over China and the global economy right now and this is reflected in its share price. Back in April, the stock was trading above $50. Today, it’s under $30.
However, management remains very optimistic in relation to the group’s medium- to long-term prospects. In the company’s recent Q2 results, management said that the actions the company has taken in recent years to build a strong balance sheet, successfully expand low-cost operations, and maintain flexible growth options will allow it to manage the current market situation in an effective manner while preserving substantial future asset values. It added that it was very confident about its copper-focused strategy.
"FCX is in a position of strength as we navigate the current global market uncertainties. Despite near-term uncertainties, the long-term market fundamentals and value opportunities for our stakeholders remain extraordinarily favorable,” said Chairman and CEO Richard C. Adkerson. “The future prospects for our markets, the quality of our assets and the experience of our team will enable us to deliver substantial value as global conditions improve," he added.
It’s worth noting here that the company has been buying back its own shares recently. Between the start of 2022 and July 20, 2022, the company spent $1.8 billion on its own stock. Meanwhile, in July, the board authorized an increase in the share repurchase program from $3.0 billion to up to $5.0 billion.
In light of the tone from management here, and the increase to the share buyback program, we see the insider buying as a bullish indicator.