Rabu, 13 April 2011

Alcoa Stock - AA Stock Price - Learn About Alcoa Stock

Alcoa Stock - AA Stock Price - Learn About Alcoa Stock

One of my current long term investment strategies is to play the global growth story, rather than focus on the American economy. Now this isn’t a particularly unique idea, but I just don’t see the American economy growing by leaps and bounds over the next 5 years. Alcoa is an interesting case â€" the valuation is quite attractive right now and I’m generally pretty bullish on the material sector â€" even industrial materials.

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Like many similar stocks, Alcoa (currently trading at $10) is well off its 52 week high ($38), but double its 52 week low ($5). The dividend has been slashed from $0.17 per quarter to just $0.03 and its difficult to see that being raised up again anytime soon. One of the major issues with Alcoa is its debt to equity ratio (about 2:1), which can become problematic when revenues are being compressed. Note that most American industrial material companies (such as US Steel) are even more highly levered, while similar Chinese firms (such as Aluminium Corp of China) tend to have less debt on their balance sheets.

Click Here to Visit TheStockGuy.com and Learn More About AA

Now conventional wisdom tells you that the Chinese industrial companies will rebound before the American ones do. Unfortunately, this belief is already impounded in the stock prices of these Chinese firms. For example, the aforementioned Aluminium Corp of China is up more than 200% off its lows and only 25% below its 52 week high. Alcoa itself does about 50% of its business in America and another quarter in Europe. The company does have some investments in emerging markets, but its bottom line is driven by what in does in the US and Europe.

So, if you believe that the American and European economies will rebound faster than the consensus view, or you have a very long investment horizon and confidence in the American industrial marketplace, Alcoa is probably a good name to add to your portfolio at these levels. If, however, you would rather pay a premium for an industrial company with more impressive growth prospects and a less-risky balance sheet, look at the Aluminium Corp of China ADR (ACH) or Usiminas (a steel company from Brazil).

The Stock Guy’s Official Ranking: 6 out of 10

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