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Copper prices are up 170% over the past four years meaning huge profits for anyone who has been investing in copper.

But now many investors are bailing on the red metal. Prices have slipped about 9% this year, and inventories are soaring.

Copper prices hit an eight-month low today (Wednesday) as slowing economic growth has led speculators to take more short positions on the metal.

Copper inventories also appear to signal low demand. Stockpiles of the red metal in the London Metals Exchange are at the highest level since October 2003.

But what appear to be bearish signals for investing in copper are not the case. Here’s what investors need to understand

A Key Signal for Investing in Copper

With copper, peak inventory levels are usually hit before a price rebound sometimes with prices doubling in less than six months.

For example, at the start of 2009, copper prices were trading around $1.30 per pound. Copper inventories were nearly 550,000 metric tons.

Within about six months, inventories plummeted by more than half to about 250,000 metric tons, and prices in the same time period rose more than 50%.

The same thing happened in 2010. Inventories again reached 550,000 tons in February, before declining 37% by the end of the year to 350,000. Meanwhile, prices climbed 52% over the same time period to over $4.00 per pound.

Now it looks like we’ve reached another inventory peak meaning a copper-price bottom.

So how should investors position themselves for a copper prices rebound?

We asked our investing team for the best pick when investing in copper. They gave us an investment that doubled in 2009 when copper prices rose more than 50%, and climbed about 70% when copper prices rose in 2010.

Investing in Copper

One of the best ways for investing in copper is a mining stock that has huge upside potential.

Our experts look at this stock and see a bargain, explained Private Briefing investment service editor William Patalon III.

We’re talking about Freeport McMoRan Copper & Gold Inc. (NYSE: FCX ).

Freeport-McMoRan stock got hammered last year after analysts bashed two energy acquisitions the company made.

Freeport in December announced it would buy McMoRan Exploration Co. (NYSE: MMR ) and Plains Exploration & Production Company (NYSE: PXP ) both of which are aggressively producing oil and natural gas through on-shore and off-shore properties in the Gulf of Mexico, California and throughout North America.

But an interesting thing happened as retail investors fled

Some of Wall Street’s sharpest hedge fund managers bought big blocks of stock in the fourth quarter, right about the same time the stock fell, explained Patalon. One of them was Omega Advisors’ Leon Cooperman, who snapped up more than 3 million shares of the stock and also publicly stated that he liked the deals themselves.

As Patalon explained, Freeport’s recent acquisition gives a double catalyst to the company’s share price.

You’ll win if copper prices advance, but you’re also going to win just from the company itself digesting this acquisition, streamlining it to operations, and getting things right, said Patalon.

Plus, while investors watch the FCX share price climb, Freeport pays 3.8% dividend yield.

For more information on why Freeport is the best way for investing in copper, check out this Money Morning Buy, Sell or Hold analysis on why to buy FCX .