Best Stocks for 2008: Alumina (AWC) shines from Chinese demand

Posted Dec 20th 2007 12:57PM by Steven Halpern
Filed under: International Markets, Newsletters, Bargain Stocks, Commodities, Stocks to Buy, Best Stocks for 2008

For 25 years, Steven Halpern, editor of TheStockAdvisors.com, has surveyed the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is one of 100+ ideas in the Best Stocks for 2008 report.

"Aluminum is one of our favorite commodities for 2008 and the best leveraged play on aluminum is Australia-based Alumina (NYSE: AWC)," explain co-editors Roger Conrad and Yiannis Mostrous in Vital Resource Investor.

"The company, our top conservative pick for 2008, owns 40% of Alcoa World Alumina and Chemicals, which, in turn, holds the world's largest, low-cost portfolio of quality bauxite and alumina assets.

"Having the world's largest integrated bauxite mining and alumina refining system (it provides approximately 13% of the world's alumina supply) in one place is the company's main attraction.

"As energy, raw materials and freight costs continue to increase, Alumina's setup makes its operations increasingly competitive and low cost versus those of rivals.

"The company is in a sweet spot as China's aluminum demand has been so strong that it's taken the industry by surprise. At the beginning of the year, forecasts called for 14% aluminum demand growth in China. Those numbers (per Alcoa's calculations) are now pointing toward 35% growth.

"Furthermore, China has a lot of way to go before it reaches the levels of consumption that more mature economies have achieved. And although it will not happen in one go, it will be a long, steady process.

"To meet this demand, as well as demand from other countries (India is a good example as urbanization is still in its early stages), aluminum production will have to grow much stronger than before. Buy Alumina at current prices."

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