Focus on Freeport

Even if copper prices were to move much lower, Freeport-McMoRan Copper & Gold (NYSE:FCX) still "appears cheap" according to Richard Moroney.

In fact, he includes the stock on his Focus Buy List, which represents the strongest buy rating issued by his newsletter, Dow Theory Forecast.

The company has completed its $25.9 billion acquisition of Phelps Dodge and the advisor feels the move made operational sense, noting it's provided Freeport with a geographically diverse asset base while also lessening its dependence on a potentially volatile political situation in Indonesia, which is the site of its huge Grasberg mine.

He explains, "The combined company should have sufficient resources to fund capital expansion while also paying off debt. To fund the acquisition, Freeport is issuing $16 billion in bonds, at least $1 billion in preferred stock convertible to common shares, and at least $2.1 billion in common shares."

Meanwhile, he observes, among the five Wall Street analysts that have adjusted for the merger, the average per-share profit estimate is $8.11 for 2007 and $8.52 for 2008.

He does caution that earnings are tied to metals prices. In fact, he says, "By one estimation, a change of $0.10 per pound in copper prices would spark a rise or fall of $0.75 in per-share earnings."

Nevertheless, while rising copper prices have supported the stock in recent trading, he concludes, "Freeport appears cheap even based on consensus expectations of much lower copper prices."

For more stock picks from the leading financial newsletter advisors, visit Steven Halpern's free website, TheStockAdvisors.com.