This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Despite Earnings Hit, Alcoa Is Down but Not Out

NEW YORK (TheStreet) -- Alcoa (AA - Get Report), the industrial metals giant, is down 6% Friday after being hit with a one-two punch: fourth-quarter earnings that fell short of analyst expectations and a settlement with the Securities and Exchange Commission over alleged for bribing of officials in Bahrain.

Long-term investors should look upon this as an opportunity to buy Alcoa at a discount. The stock is up for the month (5.5%), quarter (21%), six months (27%) and year (12.5%). As with Wal-Mart (WMT), Caterpillar (CAT) and other blue-chips, when issues arise and the share price falls, savvy investors such as Warren Buffett step in to buy for the long term.

As detailed in a previous article, Warren Buffett did this with Wal-Mart during the period in early 2012 when allegations of bribing Mexican officials surfaced. While Buffett has done well with his Wal-Mart buy, one of his greatest investments ever was in American Express (AXP).

In 1964, American Express stock fell by half due to fraud by Allied Crude Vegetable Oil that "scammed creditors for big loans." Buffett bought $13 million worth of American Express stock at that time on the dip. At present, that position is now valued at well over $2 billion.

Alcoa has suffered from the commodities slump of the Great Recession. In May 2007, Alcoa was around $41.50 a share. It bottomed out at under $6 in early 2009. Now it trades around $10.

I think Alcoa has a bullish future that should please growth investors. The earnings-per-share growth is on a very positive upward trajectory. Over the past five years, earnings-per-share growth was down by 43.90% but this year earnings-per-share growth is up by 21.01%. The analyst consensus sees earnings-per-share growth continuing to increase at a 21.90% clip for the next five years.

For value investors, Alcoa is at a discount.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
AA $13.46 0.07%
AAPL $124.75 -1.13%
FB $80.78 -1.86%
GOOG $524.05 -1.83%
TSLA $206.79 0.04%


DOW 17,826.30 -279.47 -1.54%
S&P 500 2,081.18 -23.81 -1.13%
NASDAQ 4,931.8150 -75.9760 -1.52%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs