In this article, we will take a look at the 11 best aluminum stocks to buy.
Aluminum is one of the most useful metals that have major applications in lucrative domains like aerospace, car manufacturing, computing and packaging. Estimates suggest that the global aluminum market was valued at about $1917.48 million in 2021 and was expected to grow at a CAGR of 2.1% until 2027 to reach $2171.8 million.
2022 was not a good year for the metal as reports suggested a record increase in aluminum stockpiles due to slowing demand and fears related to a global recession. A Bloomberg report said in September that London Metal Exchange aluminum inventories posted their biggest increase since February.
Similarly, a Bloomberg report in October said that companies that consume aluminum were holding off booking 2023 orders due to inflation, supply-chain issues and global recession fears.
But aluminum remains one of the most lucrative markets for long-term investors since analysts believe sooner or later the global recession will recede and the economy will come back to normal. Perhaps the best news for the aluminum industry came recently when China decided to lift its COVID restrictions. Aluminum prices immediately saw a jump. China is one of the biggest users of the metal. The country also produces aluminum. It produced 3.44 million mt of aluminum in December.
Some of the notable names in our list of best aluminum stocks to buy include Alcoa Corporation (NYSE:AA), Rio Tinto Group (NYSE:RIO) and Reliance Steel & Aluminum Co. (NYSE:RS).
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Our Methodology
In this article we scoured the aluminum industry and narrowed down our selection to 11 stocks that are poised to grow in the future based on solid fundamentals. Most of these stocks are the favorite aluminum picks of the 920 elite hedge funds tracked by Insider Monkey. However, you will also see some non-US stocks in list which give investors a solid opprtuinty to bet on the emerging markets. Some of these companies produce aluminum, while others make aluminum products.
Best Aluminum Stocks To Buy
11. Vedanta Ltd (NYSE:VEDL)
Number of Hedge Fund Holders: N/A
Vedanta Ltd (NYSE:VEDL) gives an opportunity to investors to bet on the aluminum sector of one of the biggest emerging markets in the world: India. Vedanta Ltd (NYSE:VEDL) is India’s largest aluminum producer. India has the biggest aluminum production capacity after China, and Vedanta Ltd (NYSE:VEDL) is in a position to benefit from this huge potential. Vedanta Ltd (NYSE:VEDL) on its website says that it produces more than half of India’s aluminum. It produced 1.9 million tonnes per annum (MTPA) of the metal in FY20. This means the company has more than 40% market share of aluminum in India.
Vedanta Ltd (NYSE:VEDL) operates smelters, alumina refinery and power plants across India. The stock is trading at 316 INR as of January 10. Vedanta’s shares have gained about 37% over the past six months.
10. Glencore plc (OTC:GLNCY)
Number of Hedge Fund Holders: N/A
Glencore plc (OTC:GLNCY) is a Switzerland-based company that is one of the world’s biggest miners. Glencore plc (OTC:GLNCY) also deals in the aluminum market. It processes and sells products from a range of third-party aluminum and alumina producers. These products include bauxite, primary aluminum, and aluminum alloys.
Glencore plc (OTC:GLNCY) recently gave a soft guidance amid rising costs and macroeconomic volatility. But what gives the company an edge over its competitors is its highly diversified portfolio. The company is expected to enjoy several tailwinds in the near future. These include growth in the coal market, the EV boom, and its effects on the nickel and copper markets, among others. The company’s strong position in the EV battery market gives it a sufficient buffer to offset losses from other segments. Glencore has won supply contracts with major car companies, including General Motors (GM) and Tesla (TSLA).
9. Aluminum Corporation of China Limited
Number of Hedge Fund Holders: N/A
An important Chinese player in the list, Aluminum Corporation of China is the world’s second-largest alumina producer and third-largest primary aluminum producer. Aluminum Corporation of China Limited is engaged in the extraction of aluminum oxide, the electrolysis of virgin aluminum, and the processing and production of aluminum.
However, the volatility in the Chinese market could post short-term risks for the stock. In the first nine months of last year, the company posted revenue of RMB 206 billion compared to RMB 195 billion posted in the same period the previous year.
Net profit in the period however fell a whopping 37.5% to come in at RMB 4.45 billion.
Overall, the company is a risky play in our list and presents an attractive opportunity for investors who are betting on the Chinese aluminum market.
8. Kaiser Aluminum Corp. (NASDAQ:KALU)
Number of Hedge Fund Holders: 9
Kaiser Aluminum Corp. (NASDAQ:KALU) is one of the most notable pure-play aluminum companies in the US. Kaiser Aluminum Corp. (NASDAQ:KALU) has the capacity to produce about 400,000,000 pounds (180,000 long tons) of aluminum annually. Kaiser Aluminum Corp. (NASDAQ:KALU) is also a high-yield dividend stock. Kaiser Aluminum Corp. (NASDAQ:KALU) has a dividend yield of about 3.6% as of January 10. In October, Kaiser Aluminum Corp. (NASDAQ:KALU) declared a dividend of $0.77/share. The forward dividend yield at the time came in at 4.58%. The dividend was payable on November 15 to shareholders of record on Oct. 25.
As of the end of the third quarter, 9 hedge funds tracked by Insider Monkey had stakes in Kaiser Aluminum Corp. (NASDAQ:KALU). The total value of these stakes was about $29 million. Among the notable of these stakeholders are Ken Fisher’s Fisher Asset Management, Jim Simons’ Renaissance Technologies, and Martin Whitman’s Third Avenue Management.
7. Century Aluminum Co. (NASDAQ:CENX)
Number of Hedge Fund Holders: 19
Illinois-based Century Aluminum Co. (NASDAQ:CENX) is the biggest producer of primary aluminum in the US. Over the past six months, the stock has gained about 35%. In the third quarter, Century Aluminum Co. (NASDAQ:CENX) managed to beat estimates for non-GAAP EPS. However, its revenue, despite rising by 10%, missed estimates by $4.87 million. Shipments in the quarter fell by 19%. Net income in the quarter came in at $44.3 million, which showed a $6.9 million increase sequentially.
Century Aluminum Co. (NASDAQ:CENX) is one of the best snall-cap aluminum stocks to buy now as the firm has a market cap of about $870 million and Century Aluminum Co. (NASDAQ:CENX) is trading at $9.60 as of January 10. As of the end of the third quarter of 2022, 19 hedge funds tracked by Insider Monkey reported having stakes in the company. The total value of these stakes at the end of September was $34 million.
6. BHP Group (NYSE:BHP)
Number of Hedge Fund Holders: 20
One of the biggest miners in the world, BHP Group (NYSE:BHP) operates its aluminum business under the BHP Billiton Aluminum arm. BHP Group (NYSE:BHP) produces aluminum, copper, energy coal, iron ore, manganese, metallurgical coal, nickel, silver, and uranium along with substantial interests in oil and gas. BHP Group (NYSE:BHP) is one of the high-yield dividend stocks, with a yield of 9% as of January 10.
As of the end of the third quarter, 20 hedge funds tracked by Insider Monkey reported having stakes in BHP Group (NYSE:BHP).
In the next part of this article we will take a look at some more important aluminum stocks, including Alcoa Corporation (NYSE:AA), Rio Tinto Group (NYSE:RIO) and Reliance Steel & Aluminum Co. (NYSE:RS).
5. Rio Tinto Group (NYSE:RIO)
Number of Hedge Fund Holders: 26
Ranking 5th on the list of the best aluminum stocks to buy now is Rio Tinto Group (NYSE:RIO). Rio Tinto Group (NYSE:RIO) is a mining giant which has a dedicated segment for aluminum called Rio Tinto Alcan, which is based on Canada. Rio Tinto Alcan was established in 2007 as a Rio Tinto Group (NYSE:RIO) subsidiary after the merger of Rio Tinto Group (NYSE:RIO)’s Canadian subsidiary and Canadian company Alcan.
Rio Tinto Alcan is a major miner of aluminum. Rio Tinto Group (NYSE:RIO) on its website says that the company produces some of the highest quality, lowest-carbon footprint aluminum in the world.
Rio Tinto Group (NYSE:RIO) is in the spotlight these days after China’s announcement to lift COVID restrictions. About 70% of Rio’s iron ore production goes to China. China’s reopening is expected to bode well for the company in the coming months.
A total of 26 hedge funds tracked by Insider Monkey reported having stakes in Rio Tinto Group (NYSE:RIO) as of the end of the third quarter. The total value of these stakes was $1.72 billion.
4. Arconic Corporation (NYSE:ARNC)
Number of Hedge Fund Holders: 26
Pennsylvania-based Arconic Corporation (NYSE:ARNC) produces aluminum sheets and related materials that are used in lucrative markets like automotive, aerospace, commercial transportation, industrial, packaging and building and construction markets. In 2020, the company became one of the leaders in the aluminum sheets market.
In November 2022, Arconic Corporation (NYSE:ARNC) said its board approved a two-year share buyback program of up to $200 million. Analysts believe Arconic Corporation (NYSE:ARNC) could benefit in the future from the auto sector since car companies are striving to use aluminum in their production to produce lightweight products. Arconic Corporation (NYSE:ARNC)’s rolled and extruded products have a bright future, according to market analysts.
Hedge funds upped theirs stakes in Arconic during the third quarter. A total of 26 funds in our database had stakes in Arconic Corporation (NYSE:ARNC), compared to 19 funds in the previous quarter.
3. Reliance Steel & Aluminum Co. (NYSE:RS)
Number of Hedge Fund Holders: 28
Reliance Steel & Aluminum Co. (NYSE:RS) is one of the best aluminum stocks to buy. The Arizona-based Reliance Steel & Aluminum Co. (NYSE:RS) is North America’s biggest metals services company, with services related to hundreds of metals including aluminum, brass, alloy, copper, carbon steel, stainless steel and titanium
Reliance Steel & Aluminum Co. (NYSE:RS) looks undervalued since it’s trading at about 7x 2023 earnings. As a major chunk of the company’s revenue comes from steel, it’s poised to grow as steel demand and consumption is expected to thrive in the future.
A total of 28 hedge funds tracked by Insider Monkey reported having stakes in Reliance Steel & Aluminum Co. (NYSE:RS) as of the end of the third quarter.
2. Constellium SE (NYSE:CSTM)
Number of Hedge Fund Holders: 29
Constellium SE (NYSE:CSTM) is a French company whose stock is trading on the NYSE. The Paris-based company develops and recycles aluminum products and solutions. Constellium SE (NYSE:CSTM) makes advanced alloys and engineered solutions for a range of applications, such as beverage cans, cars, airplanes, and more. It is one of the biggest aluminum companies in Europe.
In October 2022, the company posted strong third-quarter results. GAAP EPS in the period came in at €0.88, beating estimates by €0.46. Revenue in the quarter jumped 27% to reach €2.02 billion, beating analyst estimates by €50 million. Cash from operations in the quarter came in at €154 million while free cash flow totaled €74 million.
Constellium SE (NYSE:CSTM) is set to thrive because of its dominant position in the packaging market. Packing accounts for about 40% of the company’s sales, as of the first nine months of last year. As the world moves towards recyclable, environment-friendly packaging solutions, companies like Constellium will benefit.
As of the end of the third quarter, 29 hedge funds tracked by Insider Monkey reported having stakes in Constellium SE (NYSE:CSTM), compared to 27 funds in the previous quarter. The total value of the stakes held by these funds was $245 million.
Here is what ClearBridge Investments has to say about Constellium SE (NYSE:CSTM) in its Q2 2021 investor letter:
“We continue to find companies we believe fit this description at reasonable prices, such as Constellium, a new position in the second quarter. Constellium is an aluminum processor with a history of excess returns on capital above cost that has lagged during a major capacity increase to serve the auto industry, which should see strong demand given aluminum’s favorable environmental characteristics relative to steel.”
1. Alcoa Corporation (NYSE:AA)
Number of Hedge Fund Holders: 44
Pennsylvania-based Alcoa Corporation (NYSE:AA) is the world’s eighth biggest producer of aluminum. Over the past six months, the stock has gained about 17% in value despite the challenging macroeconomic environment and uncertainty in the commodities market. Analysts believe the company has secular growth catalysts in the automotive, packaging and aerospace markets. As auto companies strive to increase the fuel efficiency of ICE vehicles and the range of BEV vehicles, Alcoa is set to enjoy increasing demand. Alcoa Corporation (NYSE:AA) produces aluminum and fabricated aluminum and plays a key role in all aspects of the industry, including mining, refining, smelting, fabricating, and recycling.
As of the end of the third quarter of 2022, 44 hedge funds tracked by Insider Monkey reported having stakes in Alcoa Corporation (NYSE:AA), compared to 39 funds in the previous quarter. The total value of these stakes was $580 million.
ClearBridge Investments made the following comment about Alcoa Corporation (NYSE:AA) in its Q3 2022 investor letter:
“We bought Alcoa Corporation (NYSE:AA), a leading aluminum producer, after the stock sold off over lower commodity prices. The current price of aluminum is unsustainably low, below its cost of production, despite inventories being at historic lows. We believe these depressed prices are due to the evaporation of Chinese demand resulting from its zero COVID-19 policy, but that it will likely recover over the next few quarters.
Additionally, Alcoa is leading the industry in reducing carbon emissions from its smelting process which is helping to improve its cost position relative to global competitors. Given its compelling valuation and strong free cash flow yield, we are confident in the company as it is increasingly relied upon to meet the growing structural demand from electrification and the global energy transition.”
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Disclosure: None. 11 Best Aluminum Stocks To Buy is originally published on Insider Monkey.
