This Day On The Street
Continue to site
ADVERTISEMENT
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

Alcoa's Aerospace Move Adds Compelling Value to Aluminum Miner

NEW YORK (TheStreet) -- Over the past several years, Alcoa (AA - Get Report) management has expressed ambitions for entering the aerospace industry. To some, this seemed nothing more than talk. But it's a great idea, and Alcoa is taking steps to make it happen.

From my vantage point, entering the high-growth aerospace area was a logical move for Alcoa, seeing as global aluminum prices have been under pressure due to commoditization. Plus, the company was dealing with excess inventory, competitive pressures and weakness in emerging markets, among other issues.

Getting into aerospace was going to take time, however. And Alcoa's CEO Klaus Kleinfeld made no promises -- only telling investors to be patient and trust that they'll be rewarded. The Dow (DIA), which kicked Alcoa off its index last year, didn't want to wait. That was a bad decision.

Could Walmart Be Sitting On Another Disappointing Quarter?

The Dirty Little Secret of Money Managers: Underperformance Anxiety

Investing 101: Refine Your Research and Focus, Focus, Focus

Greenberg: Maybe It Wasn't the Weather, After All?

Alcoa stock opened Wednesday at $15.24, up 48% on the year to date. As of 1 p.m., shares hit $15.65, up nearly 5.5% today alone. Shares are now up more than 98% over the past 12 months, making Alcoa one of the market's top performers during that span. Investors have made a lot of money. And Kleinfeld has been proved right.

And with the company accelerating its aerospace transition and now expanding into other types of metals like titanium and steel, investors need to start making plans for places to store their future cash. Safes made of steel or titanium might be a good investment over the next several years.

Today, Alcoa looks like a new company -- one that has established a focus on specialized products like alloy components for aircrafts. The company's recent $3 billion acquisition of Firth Rixson, a U.K.-based maker of jet-engine components, affirms management commitment to the aerospace industry.

Alcoa is also working to get aluminum into vehicles and lightweight trucks. Automakers like Ford (F), which has a new aluminum-bodied F-150 that is considered more fuel-efficient, may become an excellent source of long-term growth. Others like General Motors (GM) and Tesla (TSLA) may not be far behind.

What's more, defense companies like Boeing (BA), which has showed interest in using more aluminum in its jets, presents Alcoa with opportunities to push higher-margin products.

These markets, combined with Firth's projected EBITDA contribution of $350 million in the next two years, makes Alcoa one of the best long-term investments on the market.

With an improved aluminum environment, combined with the company's accelerated aerospace transition, Alcoa stock should $20 in the next 18 to 24 months, making Alcoa one of the best bargains on the market.

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
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AA $12.68 -2.00%
AAPL $130.80 -1.30%
FB $79.62 -1.10%
GOOG $531.48 -1.60%
TSLA $249.29 0.63%

Markets

DOW 18,063.99 -168.03 -0.92%
S&P 500 2,108.24 -17.82 -0.84%
NASDAQ 5,036.0930 -53.2690 -1.05%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs