Tom Yeung here with your Sunday Digest.
Plenty of folks know that copper is an essential metal for electronics.
It’s conductive. A spaghetti strand of copper can move enough electricity to power a roomful of electronics.
It’s pliable. Copper wires can bend and twist around tight corners without breaking.
And it’s versatile. The red metal is used in everything from the largest electric generators to the tiniest silicon chips.
But what most people don’t know is how short the world will become of this metal.
According to an S&P Global study done earlier this year, we are now on track to consume so much copper by 2040 that every ton of demand will have just 0.76 tons of supply. Electrification and AI data centers are now consuming more copper than ever before, and miners have not discovered enough new copper deposits to keep up.
Now, a lot of this upside has already been taken by early investors. Shares of copper miner Freeport-McMoRan Inc. (FCX) have risen 67% in a year. Rival Chinese miner Zijin Mining Group has almost tripled in value since 2023.
But the smart money seems to suggest more gains ahead. Over the past several months, we’ve seen overwhelming buying activity by professional traders – some of the most knowledgeable minds on Wall Street. These people are making bullish bets on copper, creating opportunities for regular investors to profit as well.
Our resident trading expert, Jonathan Rose, explains how these clues add up.
In fact, he’s so confident in his trading system that he’s hosting the $10K to $100K Challenge. In an upcoming presentation at 8 p.m. Eastern on Wednesday, October 14, he talks about how his system spots opportunities these traders are betting on, allowing ordinary investors to keep up with the top Wall Street strategies.
And to show you precisely how his methods work, I’ve been given permission to reveal one of his top trades today.
Copper’s Comeback Kid
Before we talk about Jonathan’s strategy, let’s talk about the underlying copper thesis.
Small miners face a “valley of death” when they build a new mine. They are forced into years of heavy spending and unsustainable borrowing. Many go bankrupt long before the first ton of ore is lifted out of the ground.
Vancouver-based miner Ero Copper Corp. (ERO) faced this exact problem in 2024 when it was developing its second asset in Brazil’s northern state of Pará.
The Tucumã open-pit mine almost broke the company. Ero faced power-grid failures, a damaging windstorm, and losing its co-founder and chairman to retirement right as it needed him most.
Shares lost over 55% of their value between October 2024 and the following April.
But Ero managed to pull through. Tucumã began commercial production in July 2025, and now out-produces the 50-year-old site the firm was founded on. Management has since taken net debt leverage from 2.6X at the start of 2025 down to 0.8X, repaid $60 million on its revolving credit line, and largely funded Furnas – its next development project, also in Pará.
The company is now on track to generate $50 million of distributable cash per quarter — enough to comfortably sustain a 5% dividend yield.
That’s why I have my eye on November 2, when Ero announces third-quarter earnings. During that event, I think there’s a reasonable chance that management either declares a dividend for Q4 or announces plans for one in 2027. That would mark Ero’s first dividend or buyback in company history.
This would be a bullish sign. Much like a kid with a security blanket, conservative investors love cash dividends for their perceived safety. Studies have long shown that stocks rise about 3%-4% on average after declaring their first dividend, and then tend to keep outperforming for at least a year. (Note that Ero still has a $45 million-per-year dividend restriction on its books, which will eventually have to get lifted.)
The Copper Rally
There are also reasons to suspect that Ero will perform well in the coming months due to rising copper prices. Several major mines remain constrained, including Grasberg in Indonesia and Cobre Panamá, and we are now at the start of a potential wave of mining strikes in Chile.
On September 30, union members at BHP Group Ltd.’s (BHP) Escondida mine in Chile – the world’s largest copper mine – rejected a contract offer from the company. The 1,020-member union could go on strike as early as next week if mediation fails.
Then on October 7, workers at a separate Chilean mine owned by Antofagasta plc (ANFGY) went on strike after failing to reach an agreement over wages. The strike has not yet halted production, because the 700 workers represent just 22% of the mine’s total workforce, but analysts are warning that a prolonged disruption could impact supplies.
Meanwhile, Chinese copper buyers are returning to the market after a week-long national holiday. They typically replenish their inventories when trading resumes, and this year’s buying could be especially strong because global supplies are already tight.
Copper prices on the London Metal Exchange are starting to reflect this market shortage. Last week, copper for immediate delivery became more expensive than copper scheduled for delivery three months from now. That’s unusual. Buyers are effectively paying a premium to get their hands on copper immediately rather than wait.
That means we could see copper prices increase further in the medium term. Deutsche Bank is now calling for $10-per-pound copper by mid-2027, up from $6.60 a pound today.
Putting Insights to Work
Ordinarily, bullish investors might buy shares of a company like Ero directly. It has many factors going right for it, and shares could move above $45 over the next several months, up from $35 today.
But this roughly 30% return comes with significant downside risks.
For one, Brazil is about to hold a brutally contentious runoff election. The country is bitterly divided between an incumbent left-wing presidency and a right-wing contender, and the currency has whipsawed in recent days. Instability in Brazil could have real impacts on Ero’s production.
Then there’s copper hoarding. Buyers in the U.S. have stockpiled 2 million tons of copper from tariff fears, according to BMO Capital Markets. That’s enough to supply roughly a year’s worth of consumption. Chinese companies have also been major buyers. If these two players begin to sell, the price crunch could come quickly.
In addition, if we believe that copper prices will jump for the next several months and are uncertain what happens after that, then surely there must be a better way to use that insight than through a traditional buy-and-hold strategy.
That brings us back to Jonathan’s approach: finding a specific trade that fits the opportunity and the time frame.
In this case, traders have been making much larger bullish bets on ERO heading into January 2027. By the end of August, the number of outstanding bullish positions had climbed to 30,559, up from 4,355 the month before. Bearish positions increased by a much smaller amount, from 395 to 1,112.
That doesn’t guarantee the stock will rise. But the imbalance gives Jonathan a reason to investigate: Why are traders positioning so heavily for gains during that particular window?
His answer was a bullish ERO trade designed to benefit from a move higher through January 2027, with a defined amount at risk. Rather than simply buying the stock and holding indefinitely, he identified a trade built around the opportunity he saw over the next several months.
Big Swings for Big Returns
Many will agree that Tiger Woods was a great golfer. After all, he won 82 PGA Tour tournaments and became a household name.
In fact, he won the 2000 U.S. Open by a full 15 strokes – a record that remains unbroken today.
Now, the reason behind his success is quite straightforward: He could hit the ball farther than almost everyone else while still maintaining control. During the 2000 U.S. Open, he was driving the ball almost 300 yards on average and reaching the green with two strokes remaining to make par on 70.8% of holes. (This is known as “reaching the green in regulation.”)
His competitors managed it just 48.4% of the time.
Jonathan approaches a trade with that same attention to distance and control: How much could it make, and how much is he willing to put on the line?
At the price he discussed, his bullish ERO trade required $200, which was also the maximum amount that position could lose. If ERO finished at $50 when the trade concluded in January 2027, it would generate a $300 net profit before fees, a 150% return on the amount invested.
That’s a hypothetical payoff, not a forecast. The trade could also lose the entire $200. But it illustrates why Jonathan looks beyond the stock itself: A roughly 43% rise from $35 to $50 could produce a much larger percentage gain through the specific trade he identified.
There are other ways to approach the same opportunity, including trades that reduce the amount at risk in exchange for limiting the potential profit. Jonathan will explain how he evaluates those choices during his free $10K to $100K Challenge.
If you’d like to see how he spots unusual trading activity, turns those clues into a specific trade, and weighs the potential reward against the risk, .
Until next week,
Thomas Yeung, CFA
Market Analyst, InvestorPlace
