Look for Alcoa to Rebound
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John Murphy
Look for Alcoa to Rebound
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Alcoa (NYSE: AA), the third largest aluminum producer in the world, started off earnings season with disappointing numbers.  But investors should expect the member of the Dow Jones Industrial Average (NYSE: DIA) to rebound.  Like Rio Tinto (NYSE: RIO), the world’s biggest aluminum country, and BHP Billiton (NYSE: BHP), the largest natural resources company in the world, demand is starting to increase again for commodities.

That is especially true from China.

Like so many other commodities, China is the world’s largest consumer of aluminum.  Economic growth is starting to improve again in China.  That is very bullish for Alcoa.

India and the rest of Asia is starting to recover from The Great Recession, too.  That will increase the demand for industrial metals from Alcoa, Rio Tinto, and BHP Billiton.  Most of the growth for aluminum and other industrial metals like copper will come from emerging market nations.

It is also positive news that motor vehicles sales are doing well.

Car companies use a great deal of aluminum.  Here again, China is the world’s largest market.  In addition, demand from China for cars and trucks is projected to increase.

Alcoa was down last week due to its poor earnings report and settlement of a bribery scandal.

But it is up for the last month, quarter, six months, and year of market action.  Revenues exceeded expectations for the fourth quarter of 2013.  It is also selling at a substantial discount, based both on price and assets.  Earnings growth is expected to continue to be strong for Alcoa, too.  With its dividend, Alcoa is attractive to growth, income, and value investors.


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