We recently compiled a list of the 8 Best Copper Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where Teck Resources Limited (NYSE:TECK) stands against the other copper stocks.

Overview of the Copper Supply and Demand

Copper is recognized as a critical metal due to its extensive applications, particularly in electrical wiring and renewable energy infrastructure. Prices of copper reached a record high during the first half of 2024, selling at $5.11 per pound on May 21, 2024. However, the price dropped slightly during the third quarter but remained elevated to its historic rates from the past two years.

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At the start of Q3, copper was priced at $4.42 per pound. It peaked at $4.65 on July 5 but then declined to a low of $3.95 by August 7. The third quarter ended with prices recovering to $4.50 on September 30.

There are several factors affecting the prices of copper. Firstly, the demand for this metal remains high, largely driven by sectors related to the energy transition, including renewable energy and electric vehicles (EVs). However, this demand coincides with a slowdown in the Chinese real estate sector, which is traditionally a major consumer of refined copper. Regardless of the challenges in the real estate market in China, the global demand for copper saw a slight increase of 2.5% in the first half of 2024. The growth was driven by notable demand from China of around 2.7% while other regions also witnessed demand growth of around 2%.

However, despite high consumption, the supply side outpaced the demand. According to a report by the International Copper Study Group (ICSG), there was a surplus of 535,000 metric tons (MT) through the first eight months of 2024. The global copper mine production remained elevated, increasing by 2% to reach 14.86 million MT from January to August 2024. Chile’s Escondida and Collahuasi mines remained key contributors while operations in the Democratic Republic of Congo and Indonesia reported 11% and 22% production growth, respectively. In addition to raw copper refined metal production also witnessed a 5% increase driven by expansion in China and the launching of new facilities in the Democratic Republic of Congo.

According to a report by Investing News Network, analysts believe that the primary reason behind higher prices during the first half of 2024 was not the fundamental supply-demand play, but was led by speculative investment. Analysts back this sentiment on the assumption that market participants would have taken a cautious approach following substantial gains in Q2 resulting in fluctuating prices of copper.

Looking ahead, the ongoing struggles in China’s real estate sector have dampened overall demand for copper. The government's efforts to stimulate the market through various initiatives to boost housing projects are expected to revive global demand further. Moreover, energy transition efforts also continue to fuel demand for copper, the International Energy Forum estimates that approximately 1.1 new mines will need to come online annually until 2050 just to maintain current demand levels.

Our Methodology

To compile the list of the 8 best copper stocks to buy according to hedge funds, we used the Finviz stock screener and our previous articles. Using the two sources we curated an aggregated list of copper stocks sorted by market capitalization. Next, we ranked these companies based on the number of hedge fund holders as of Q3 2024, sourced from Insider Monkey’s database. The list is ranked in ascending order of the number of hedge funds.

Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

A close up of an automated machine processing other Industrial Metals & Mining resources.

Teck Resources Limited (NYSE:TECK) 

Number of Hedge Fund Holders: 68

Teck Resources Limited (NYSE:TECK) is a Canadian company that focuses on mining and producing essential metals, primarily copper and zinc. The company operates several mines across North and South America, including Antamina, Highland Valley Copper, Red Dog Mine, and Carmen de Andacollo.

Management recently transformed its business strategy to concentrate on energy transition metals, which are essential for the shift towards renewable energy and electric vehicles (EVs). This change was marked by the sale of its steelmaking coal business to Glencore for $7.3 billion, completed on July 11, 2024. This divestment allows Teck Resources Limited (NYSE:TECK) to focus primarily on its copper and zinc operations, which are crucial for supporting low-carbon technologies.

In addition, the company has been making significant progress towards its copper growth strategy. During the third quarter of fiscal 2024, Teck Resources Limited (NYSE:TECK) delivered an adjusted EBITDA of $986 million driven by record copper production at its Quebrada Blanca (QB) mine. The mine produced 52,500 tonnes of copper in Q3 2024, which is an increase from 51,300 tonnes in Q2 2024. Moreover, the mill throughput rates also increased, confirming that the plant's design is robust. Management anticipates reaching the design throughput rates by the end of 2024, which would enhance overall production efficiency. Looking ahead, management has updated its guidance for QB mine copper production to a range of 240,000 to 280,000 tonnes, along with molybdenum production expected between 4.0 to 5.5 thousand tonnes. It is one of the best copper stocks to buy according to hedge funds.

Greenlight Capital stated the following regarding Teck Resources Limited (NYSE:TECK) in its first quarter 2024 investor letter:

“Finally, we established a medium-sized macro position to benefit from higher copper prices. Long-time partners may recall that in 2021 we presented Teck Resources Limited (NYSE:TECK) at the Sohn Investment Conference. At the time, our thesis was based on a combination of being bullish on copper and believing that TECK was about to exit the penalty box after a multi-year investment in a new copper mine that was on the brink of finally coming online. Back then, TECK traded at C$31.09. Based on copper at $4.50 a pound, we thought the stock was undervalued by half. It has since doubled (and dramatically outperformed copper peer Freeport-McMoRan) and, over time, we have reduced the position into strength.

As we showed on this slide from our 2021 presentation, our thesis was that after several new mines, including TECK’s, there would not be new supply available in the second half of this decade.

Time has passed, the new mines have come online and the anticipated gap between supply and demand is likely to open up in the next year. While we still believe TECK is undervalued should copper prices rise, it is less undervalued than it once was. Our thesis now is that copper supply is about to fall short of demand, forcing prices substantially higher. Once again, we think the best way to invest in that thesis is the most direct way – in this case through options on copper futures.”

Overall TECK ranks 2nd on our list of the best copper stocks to buy according to hedge funds. While we acknowledge the potential of TECK as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than TECK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

 

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Disclosure: None. This article is originally published at Insider Monkey.