Copper prices are soaring, and Citigroup (New York Stock Exchange:C) Analysts say we are entering a new copper bull market. Global X Copper Miners ETF (NYSEARCA:COPX) is an effective way to invest in this promising field that is gaining momentum.
I'm bullish on this $2.1 billion ETF from Global X based on its favorable setup for copper in the short and long term. Additionally, we like that this ETF provides investors with exposure to a diverse group of copper miners and has a yield of 1.9%.
What is happening to copper?
Copper prices recently hit a 15-month high, with Citi analysts saying copper is in its second bull market this century, driven by “robust” demand from decarbonization efforts. ing. Citing the copper bull market of the 2000s, when surging demand from China saw prices rise fivefold in just three years, Citi said the next three years could see another “explosive price rise”. Stated.
Analysts at Bank of America note that Citi is not alone in this view.New York Stock Exchange:BAC) We also believe prices will rise this year due to increased demand and the lack of new copper mines coming online.
In the short term, mining disruptions will cause Chinese smelters to cut copper production and push prices higher as manufacturing activity in both the United States and China (the world's largest copper consumers) recovers. There is.
In the long term, growth in artificial intelligence is likely to increase demand for copper for use in data centers. Commodity trading firm Trafigura believes demand driven by artificial intelligence and data centers could increase demand for copper by more than 1 million tonnes by 2030. This is on top of a supply shortfall of 4 million to 5 million tons that the company expects, and a potential increase in demand for copper. It will exist by 2030.
In addition to data centers, further demand is likely to grow as technologies such as electric vehicles and renewable energy storage grow in popularity.
Additionally, COPX sponsor Global X commented on the secular bull market in copper, explaining: “According to forecasts, copper consumption is expected to reach 43 mmt by 2050, up from 26 mmt in 2022. However, supply may not be able to keep up with the increase in demand,” and such Equilibrium could support copper prices and create opportunities for miners. ”
Considering these short- and long-term catalysts, there are plenty of good reasons for investors to gain exposure to copper, and that's where the COPX ETF comes in. Let's take a closer look at COPX's strategy below.
What is the strategy of COPX ETF?
According to the fund's sponsor, Global “I'm there.”
Global X explains, “COPX provides efficient access to a basket of companies involved in copper mining in a single transaction.”
What appeals to me about COPX's approach to investing in copper miners is the leverage these companies have on rising copper prices. Therefore, investing in these companies may offer additional benefits than simply investing in copper itself.
Additionally, investing in COPX provides a diversified portfolio of copper miners. This provides a useful option for retail investors who may not be familiar with the nuances that distinguish different copper mining stocks, allowing them to gain exposure to the entire sector. We discuss this diverse holding in more detail below.
COPX Copper Mining Stock Basket
COPX owns 37 stocks, with the top 10 holdings accounting for just over half of the assets, giving the fund a strong exposure to copper miners without giving investors over-exposure to just a few stocks. offers fairly diverse exposure.
Below is an overview of the top 10 COPX stocks from TipRanks' holdings tool.
As you can see, the Lundin mine in Canada (TSE:LUN) has the highest ownership here with 6.3%, followed closely by Chile's Antofagasta Plc (OTC:ANFGF), with a weight of 6.1%.
There aren't many familiar names here, but US investors may be familiar with Freeport-McMoRan (New York Stock Exchange:FCX) and Nanbu Copper (New York Stock Exchange:SCCO).
I like the fact that COPX invests in this broad basket of copper mining stocks. This diversified exposure protects investors from company-specific risks that may arise when investing in individual mining companies, such as mine operational issues, mine operational issues, and political and environmental risks. Because it can protect you. may occur.
Copper mining is a global industry and COPX also provides investors with good geographic diversification. Canada holds the top spot within the fund with a weight of 36.1%, followed by the United States with a weight of 10.8%. No other country has a double-digit weight, and other countries include China, Australia, Japan, the United Kingdom, Poland, and Sweden.
Does COPX pay dividends?
COPX pays dividends, further increasing its attractiveness to investors. While its 1.9% dividend yield doesn't necessarily grab attention, it's still a decent dividend that beats the average dividend yield of the S&P 500 (SPX), currently only 1.4%.
How much does COPX charge investors?
One of the disadvantages of COPX is that it is quite expensive. The expense ratio of 0.65% is currently higher than the average expense ratio of all ETFs of 0.57%. This 0.65% expense ratio means that an investor who puts his $10,000 into COPX will pay his $65 in fees on an annual basis.
Is COPX stock a buy, according to analysts?
Turning to Wall Street, COPX earns a Moderate Buy consensus rating, based on 21 Buy, 15 Hold, and 2 Sell ratings assigned over the past three months. doing. COPX's average price target of $47.17 suggests upside potential of 1.8%.
Conclusion: Copper looks promising both in the short and long term
I'm not worried about the lack of average analyst price target. This seems to have come as a surprise to the public, given that copper prices have soared rapidly and significantly. Many analysts likely have not yet adjusted their targets for these copper miners.
Looking ahead, copper looks attractive in both the short and long term given the potential for increased supply and demand constraints. Therefore, I am bullish on his COPX. COPX is an effective way to gain exposure to this trend thanks to the fact that it offers diversified exposure to copper miners.
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