Market Overview

Will Greater Global Car Sales Help Investors Benefit From Alcoa?

Will Greater Global Car Sales Help Investors Benefit From Alcoa?

For long term investors, the recent dip in the price of Alcoa (NYSE: AA) should be looked upon as an opportunity to buy at a discount to profit from the increasing sales of Ford (NYSE: F), General Motors (NYSE: GM), and other car makers around the world.

Alcoa, one of the biggest aluminum producers in the world, fell recently due to disappointing earnings. Opening up earnings season, Alcoa's fourth quarter results for 2013 fell beneath the expectations of the analyst community. While the earnings of Alcoa were short, its revenues exceeded expectations.

A member of the Dow Jones Industrial Average, Alcoa was hit hard by The Great Recession.

Due to the global slump in commodities, the stock price of Alcoa fell. But it has rallied strongly in recent market action. Momentum investors should like that Alcoa is up for the last month, quarter, six months, and year of trading.

Related: Detroit Auto Show Unveilings Underscore Auto-Makers' Retooling Efforts

There is much for value investors to like about Alcoa, too.

The price-to-sales ratio is just 0.48. That means that each dollar of sales is going for more than a 50 percent discount in the stock price. Assets are on sale, too. The price-to-book ratio is 0.86. That means that the assets of Alcoa are selling at almost a 15 percent discount in the shares.

With motor vehicles sales increasing around the world, the demand for aluminum will increase.

That is especially true for the automobile market in China, as previously reported. Alcoa is well positioned to profit from that growth, both in the United States and abroad.

That should have the stock price for Alcoa in high gear again, as it is up more than 10 percent for the last month.

Posted-In: Long Ideas Emerging Markets Commodities Markets Trading Ideas Best of Benzinga


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