Alcoa Inc (AA): Multiple Insiders Are Buying

Arguably the insider purchases could be taken as bullish on the aluminum industry in general rather than Alcoa Inc (NYSE:AA) specifically. Other aluminum companies include Alumina Limited (ADR) (NYSE:AWC), Kaiser Aluminum Corp. (NASDAQ:KALU), Century Aluminum Co (NASDAQ:CENX), and Aluminum Corp. of China Limited (ADR) (NYSE:ACH). These are all considerably smaller than Alcoa Inc (NYSE:AA) in terms of market capitalization. Alumina Limited (ADR) (NYSE:AWC) is expected by the sell-side to be barely profitable for this year, and its forward P/E is the highest of this peer group; given the commodity nature of the business, we would avoid it.

Century Aluminum Co (NASDAQ:CENX) and Aluminum Corp. of China Limited (ADR) (NYSE:ACH) are unprofitable on a trailing basis, with analysts expecting net income to improve enough that their forward earnings multiples are only slightly higher than Alcoa’s. Still, we aren’t convinced that they merit that premium particularly with their businesses struggling recently. Kaiser Aluminum Corp. (NASDAQ:KALU)’s trailing P/E is only 13, placing it at something of a discount to Alcoa even with that company’s most recent quarter annualized. It too has been improving its bottom line compared to a year ago.

We’d advise some caution in looking at aluminum stocks at this time, even with the consensus insider purchases, or at least being sure that an investor’s portfolio is not too exposed to macro conditions (there’s also the factor that these particular insiders have bought Alcoa in the recent past with poor results). If there is an interest in the industry, Kaiser and Alcoa seem like safer prospects than their peers but it might be best to wait for another quarter of results to see if the companies can sustain their recent earnings performance.

Disclosure: I own no shares of any stocks mentioned in this article.