Even in the beaten down commodities sector, you can find stocks with clear upside catalysts. Case in point: shares of metals miner Glencore surged more than 10% last week (on the London Stock Exchange) on news that the firm planned to  suspend operations at a pair of African copper mines, issue new shares, cut its dividend and sell assets in an attempt to  preserve cash and cash flow.

The move is seen as an inflection point for the industry and similar steps may soon be taken by other commodities producers. Industry wide output cuts of various commodities could set the stage for supply and demand to come back into equilibrium, which would boost pricing.

Copper, in particular, may be subject to a brightening pricing picture.

Are Commodities About To Head Higher?
Of course, demand from China remains as the clearest headwind for commodity producers. Chinese imports of raw and finished goods have now fallen for 10 straight months, which has led to speculation of further policy easing by the Chinese government. Zhou Xiaochuan, governor of China’s central bank, told the G20 finance ministers earlier this month that the recent correction in stock prices is nearly over.

Remarks like these from a government that directly controls its economy are a strong signal for markets. China accounts for nearly half of global copper use, and is a key consumer of many other industrial metals. Further stimulus measures would lead to expectations of a rebound in raw material imports.  

Since it takes time for stimulus to work through the economy, China has been known to rollout measures later in the year. This gives policy time to work through the economy by the time New Year’s celebrations begin in late January. Stimulus measures were unveiled in the last quarter of the year in 2011, 2012 and 2014.

Lower copper prices are likely impacting production as well. The International Copper Study Group (ICSG) recently reported that the copper industry is producing 60,000 fewer metric tons each month than corresponding demand. Further production cuts from big players like Glencore could finally stabilize prices and bring investors back to this sector ahead of an anticipated rebound.

This Copper Giant Could Be Next
Freeport McMoRan (NYSE: FCX) mines more copper than any other publicly-traded company in the world. As my colleague David Sterman recently noted, the company plans to sharply reduce capital spending in 2016. (At the same time, the company plans to issue fresh capital to shore up its balance sheet).

As David also noted, the company has talked about the possibility of an equity issuance in its oil & gas operations, as well as other divestitures, but has yet to make any formal announcements on the subject.

And it’s becoming increasingly likely that the company will need to put strategic measures on the table quickly, as shareholder activist Carl Icahn recently announced a major new stake in the company.

Analysts have widely criticized Freeport for its recent history of major acquisitions. Freeport paid a high premium for two oil companies in 2012, and shareholders were not allowed to vote on the matter. With activist control, I expect some changes to be made in the executive suite, which could also help improve shareholder sentiment.

Shares are trading for just 6.0 times expected 2016 earnings of $1.86 per share. I look for an increase in investor sentiment around strategic measures to push this higher and have set a price target of $15 per share. Set a buy-under price of $12.00 per share.

Risks to Consider: Shares of Freeport McMoRan have already bounced 31% since the August 13D filing by Carl Icahn and may trade sideways until the company releases plans for an asset sale or other strategic actions.

Action to Take: It is looking highly likely that Freeport McMoRan will make a significant strategic move, issuing shares for its oil & gas operations or through other asset sales. Build a position in the shares ahead of the news for a bounce on investor sentiment.

Editor’s Note: Apple just announced the launch of its newest iPhone on Wednesday. The tech giant has already ordered more than 85 million units from its manufacturer — a new record. If history is a guide, these Apple suppliers could gain 100% in the next 6 months as a result. Learn more.