Alcoa Inc. (AA) is Finally Ready for a Breakout

Page 1 of 2

Alcoa Inc. (NYSE:AA) has been pushed down over 70% the last five years as a weak aluminum industry continues to plague the company. This aluminum miner is a situational turnaround story that may finally get a breakout in the near future thanks to bolstering industry fundamentals. Ray Dalio, founder of Bridgewater Associates, is one of Alcoa’s big name investors (check out Ray Dalio’s top picks).

BRIDGEWATER ASSOCIATES

The aluminum company has been looking to establish itself in new markets that includes packaging and transportation. Alcoa recently signed a deal with Airbus to provide aluminum sheet and plate for aircraft manufacturing – a deal valued at $1.4 billion. Other key initiatives include a joint venture with a Saudi Arabian mining company to build the largest low-cost aluminum facility in the Middle East. Going along with its cost cutting efforts, Alcoa curtailed its smelting capacity by almost 400,000 metric tons earlier this year in an effort to trim excess fat, so to speak.

Alcoa is expecting aluminum demand to be up in the current fiscal year thanks to continued demand increases in North America, Brazil and India. The real fundamental demand driver will be an expected 10%+ increase in China. Compared to the other major mining companies Alcoa has seen some of the more robust weakness, with 5-year average operating margin in the mid-single digits, where all the other mining stocks have an average of 25% or higher. In an effort to combat a declining margin problem, Alcoa hopes to improve its midstream and downstream operations.

Alcoa sales are expected to be down 6% in 2012, but rebound strongly, up 9% in 2013 on the back of rising aluminum prices. Part of the driving force for aluminum demand is the economic outlook. GDP for the U.S. is expected to grow 1.8% in 2013 and global GDP of 2.3%. Although there are a number of other more diversified mining companies with some exposure to the aluminum markets, such as BHP Billiton Limited (NYSE:BHP), Vale SA (NYSE:VALE), Cliffs Natural Resources Inc (NYSE:CLF) and Rio Tinto PLC (NYSE:RIO), we believe that the positive price and volume increases will drive Alcoa the highest. But what about the competitors?

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 9 Most Dangerous Countries for Tourists to Visit

Reign of Terror: The 10 Most Ruthless Politicians in History

On the Move: The 10 Fastest Growing Businesses in 2015

Fast Money: The 10 Highest Paying Fast Food Restaurants

Mixing It Up: The 14 Best Music Mashups of 2014

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!