Alcoa (AA)

This has done very well and is probably a Sell. Aluminium prices increased by about 15%-20% in the last 3 months, due to some production curtailment. This is one commodity that China produces domestically. Capitalization in this industry is quite low at about 78%, which means there is plenty of capacity out there.

Aluminium is a big auto industries play. The US auto standards are changing in 2016, and auto demand for aluminium is going to really jump, about 25%. This company has done pretty well, even with weak aluminium prices. He would wait for a bit of a pullback before stepping in.

Hasn’t owned this because he just doesn’t feel comfortable in a situation where they are making strides on the cost side, and by trying to equalize the supply/demand situation. There has been a tremendous amount of supply in the smelters, and they have been shuttering smelters to try to equalize that. They are not completely in control because China is a big producer. However, the company has done a good job.

It is cyclical. There is a mandate that cars have to be lighter and more fuel efficient so that will mean more aluminum. AA-N is getting into more places than before. There is some over head resistance in about 10-15% up and then it might pull back.

Has done well. They did well at cost cutting and made acquisitions to diversify. She would be inclined to take profits, even though the stock may go up for a couple of years if there is good demand for metal products.

Cyclical. China is slowing down. The stock is going up in anticipation of better earnings. Model $10.35, 30% negative differential. It is cheap. Prefers others, see Top Picks.

He has not favoured it. They only control the cost side of the process. In the last 7 years they closed down 30% of their production capacity. Chinese production is the wild card. They can’t control it. So he does not support the company or the stock. He is nervous despite what the stock price has done.

On their 10 year operating results, revenues were down and earnings are down even more. This company seems to be struggling.

We are seeing a lot of companies doing well because they are cutting costs and increasing productivity. However, revenue is the great driver of success and we are really not seeing a lot of that. There is still too much capacity in the area. We need to buy companies that have growth and this company just doesn’t fit that.

This company has sort of reinvented itself and is much more focused on automobiles. Chart shows a fantastic up trend with a little bit of sideways action now. Sometimes that can be a continuation. This suggests that if it gets above $13.80 with a bit of price action, they can move higher. However, you will probably see this settle in a band of about $10.75-$13.80. If you own, tighten up your Stops just below $13. If you want to trade it, wait until it got just above $14. A better time to look at this one would be October.

Hasn’t looked at this for some time. Good company. The argument for owning or considering buying is if you can see a continuing US economic recovery, not to mention globally and this will certainly be a player.

(A Top Pick April 30/13. Up 60.91%.) Feels that this is just on the cusp. After aluminum companies have shut in a lot of high cost aluminum, supply is declining somewhat and demand is poised to take off in the next couple of years because of US auto demand is rising. To him, their peak earnings will be $2.50-$3 a share. In the past, when earnings have been at this level, this has been a $30 stock.

A very good, large cap aluminum producer levered to the US economy and into the global economy. There is a trend towards light weighting in cars as opposed to having a lot of steel in your cars. Feels it has good long-term prospects.

In general, he is not a big fan of the metals industry right now. A lot of capacity has been built in the last few years and China slowing down has an impact. However, this company is in a unique position. They have gotten rid of a lot of their commodity business and have focused on specialty products. Now focused on higher margin products.

(Market Call Minute) Commodity sector rolled over 18 months ago. AA has been a beneficiary of cyclical rally since.