What will Richard Adkerson do? I can tell you what the CEO of Freeport-McMoRan (NYSE: FCX) (Cramer's Take) ought to do in the wake of the Bank of America-Merrill Lynch upgrade to buy from sell. He ought to do the biggest darned equity offering in history.
I like Richard. He's candid, he's a great copper man, but he spent too much at the high on Phelps Dodge and wasn't prepared when copper prices plummeted as his balance sheet's simply not so hot. So he had to cut his dividend at the bottom, literally at the exact bottom.
Now the stock is roaring back in part because of upgrades like this morning, where estimates go from, I kid you not, $2.85 to $9.50 and Adkerson's been given a golden opportunity for a gigantic secondary that can pay down debt and give him the flexibility he needs so he doesn't take the whole company's life into its hands again.
Anyone who was trading the stock last year knows that's surely what it felt like.
FCX gets that kind of estimate swing because it truly is the classic cyclical, the purely levered play on copper, 50 cents in earnings per share per for every 10-cent copper rise. Of course, those who were bullish on China, which uses one-third of the world's copper, quickly got bearish on FCX when China slowed. As China ramps back some people keep thinking it has to cool and they've been playing the inventory game, betting that the stock would get hit when we have a few weeks of inventory heaviness.
We had one of those. It lasted two weeks. That was all she wrote. Hence the upgrade.
We've seen a ton of equity offerings done at the bottom including most recently the casino deals and the Dow Chemical (NYSE: DOW) (Cramer's Take) piece of business. We have had another set of Boston Properties (NYSE: BXP) (Cramer's Take)/Brandywine REIT (NYSE: BDN) (Cramer's Take) deals. We had the endless bank supply, and boy, has that ever dried up and been put away.
All of those deals worked because people saw the prospects improving. It is time for Freeport to come to the market. It will be a great piece of business and, hopefully, it could eliminate the binary nature of this great firm's balance sheet.
Random musings: Time to admit that Unilever (NYSE: UN) (Cramer's Take) and Colgate (NYSE: CL) (Cramer's Take) seem to be feasting on Procter & Gamble (NYSE: PG) (Cramer's Take). Will this be the bad month that Costco (NASDAQ: COST) (Cramer's Take) fans ignore? Can someone give me the true skinny on MBIA (NYSE: MBI) (Cramer's Take) and Radian (NYSE: RDN) (Cramer's Take)? Are they really able to make any money?
Jim Cramer is co-founder and chairman of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer had no positions in the stocks mentioned.