Look for Alcoa Inc. (NYSE: AA) to benefit from the the U.S./global economic recoveries, which is I'm Reiterating my Buy rating for the company, first recommended on August 17, 2009 at a price of $12.41. Alcoa's revenue in FY2010 should increase 13-15%, assuming likely stabilization in the U.S. housing and auto sectors. Aluminum companies also should benefit from modestly higher aluminum prices next year.
Meanwhile, production discipline by China also should continue in the years ahead, eliminating a major cloud/uncertainty regarding surplus aluminum flooding the market. Alcoa's comprehensive cost cuts contribute to the improving operational story. The First Call FY2009/FY2010 EPS estimates for AA are a loss of 66 cents to a profit of 55 cents.
Technically, Alcoa's stock chart is not for the squeamish: an uptrend permeated by large price swings and volatility, including repeated violations of the key, 50-day moving average.
Stock Analysis: Aloca is a high-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in AA now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your AA position before December 2009. Sell/Stop Loss if you were to buy shares in this company: $6.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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