Last year, my best Chasing Value recommendation was Aluminum Corp of China ADS (NYSE: ACH), which sailed from $22 per share to a 52-week high of $90.95. I will take credit for finding a winner, but I cannot in all honesty say that I thought it would more than quadruple -- that part was luck. (The original story was Chasing Value: Aluminum Corporation of China ADS, which I still think is worth a read today.)

If you acquired what is often referred to as Chalco (China Alum. Co.) anywhere near the time I recommended it and still own it you are probably still very content with only perhaps a 90% gain as the stock has come down some, closing last Friday May 9 at $40.98

Another of my recommendations was General Dynamics Corp (NYSE: GD), which closed Friday at $90.92. This one is only up a few percentage points from my starting point of $88 per share, but you will note, curiously, that it is only 3 cents off ACH's high. Given the market's bad year, a gain when the market is losing is a bigger plus than the casual observer would perceive. The defense sector has provided the anticipated market defense as I discussed.

In one of my recent posts on stock pricing, I received a comment from one of our more acerbic readers, who asks some good questions once he simmers down. He wonders why investors have not bid up the share price of Alcoa Inc. (NYSE: AA):

• "How come nobody has the hots for ALCOA? It is very cheap. . . There is mining stock merger-mania yet nobody is buying ALCOA in anticipation of it occurring to ALCOA as well. Are we gonna wait until it is too late?"
  

First of all, I should remind everyone that the price of a stock on any given day is a myth. It is worse than a myth, it is just a fleeting moment in time. I would call it semi-arbitrary most of the time.

Alcoa closed yesterday at $34.06, having a trailing P/E ratio of 11.5. That falls between its 52 week low of $26.69 and its high of $48.77. Also worthy of note, Alcoa has a yield of 2% which is about 10% higher than your average S&P stock. This seems positive.

Perhaps my friend is on to something. Alcoa is off its high considerably and has a lower P/E and higher yield then any of the indices. But its ROE of 15 and ROIC of 11 are all too average, not exceptional -- and these are important considerations. The P/B of 1.89 also seems average but the P/S of 1.03 looks very appealing.

Rio Tinto (NYSE: RTP), an international mining company, rejected a buyout proposal from BHP Billiton (NYSE: BHP), the world's largest mining company on November 6. BHP has until Feb. 6 to make a formal bid or walk away for at least six months, according to a U.K. takeover panel review.

Alcoa (NYSE: AA) and Aluminum Corp of China announced a 9% stake in RTP on February 1.

RTP overall option implied volatility of 64 is above its 26-week average of 53 according to Track Data, suggesting larger movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

Aluminum Corp. of China Ltd. (NYSE: ACH) stock is slumping today as aluminum futures are off by more than 2% as are other industrial metals like copper. Investors may also be locking in their gains after Friday's big positive move. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on ACH

The stock has been climbing steadily all year, hitting a one-year high of $76.99 on Friday. This morning, ACH opened at $74.00. So far today the stock has hit a low of $72.78 and a high of $75.33. As of 11:00, ACH is trading at $74.92, down $1.93 (-2.5%). The chart for ACH looks bullish but slightly deteriorating, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bearish hedged play on this stock, I would consider an October bear-call credit spread above the $85 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverages nice returns. For this particular trade, we will make a 6.4% return in 2 weeks as long as ACH is below $85 at October expiration. Chalco would have to rise by more than 33% before we would start to lose money. The stock has never been above $77 and would have to jump by over 14% in less than two weeks to cause a problem.

Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in ACH.