Glencore shares are a popular investment. It isn’t hard to see why – demand for copper’s booming due to the growth of the AI and renewable energy markets and it’s a major player in the industry.
There are lots of other great stocks that offer exposure to copper though. Here’s one I’ve bought for my ISA.
My new copper stock
The stock I’ve snapped up is Mueller Industries (NYSE: MLI). Listed in the US, it’s a leading manufacturer of copper tubes and fittings as well brass and aluminum products.
It operates through a range of companies that are focused on three main areas: piping systems, climate products, and industrial metals. Industries it serves include heating, ventilation, and air conditioning (HVAC), plumbing, refrigeration, medical, automotive, military & defence, marine, data centres, and more.
At present, it has a market-cap of around $15bn. So you could say it’s a medium-sized company (it’s in the S&P 400 mid-cap index) .
The share price is around $140 today. However, the company just announced it’s about to do a two-for-one stock split.
Why did I buy?
As for why I chose this copper stock over others like Glencore, there are several reasons. For a starter, the company has a lot of operational momentum at the moment and recent results have been really strong.
In Q1, for example, net sales rose 19% year on year to $1.19bn. Net income for the period surged 52% to $239m.
Second, it strikes me as a beneficiary of the US data centre buildout. These require a lot of copper tubing for cooling (it’s used inside server racks to handle the intense heat generated by AI chips) and this company specialises in this.
It should also benefit from a range of other trends though. Energy grid improvement and the rising need for air conditioning due to hotter temperatures are two that come to mind.
Third, the company has an exceptional long-term track record when it comes to growth and profitability (30 years of profitable growth through all industry cycles). This sets it apart from other copper businesses like Glencore that have historically had very volatile earnings and generated losses at times.
It’s worth noting here that return on capital employed – one of my favourite profitability metrics – is very high. Over the last five years, it’s averaged 37% which shows Mueller’s very effective at generating profits from its capital.
Fourth, we have share buybacks and rapidly-rising dividends. Last quarter, the company hiked its dividend payout by 40%.
Finally, the stock’s attractively valued on a price-to-earnings (P/E) of 17 and its share price is in a nice upward trend. So we have growth, quality, and momentum.
What are the risks?
In terms of risks, a global economic slowdown is one. This would most likely lead to reduced demand for copper products. Acquisition risk’s another issue to consider. While the company has a good track record when it comes to making acquisitions, future deals could backfire.
I think the stock has the potential to generate attractive long-term returns however. In my view, it’s worth a closer look.
Should you invest £5,000 in Mueller Industries right now?
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Edward Sheldon owns shares in Mueller Industries
