3 Reasons to Sell Alcoa Today

The turmoil in the markets makes it too easy to justify selling any stock these days. Yet, while panic never helps investors, it's still a good idea to play devil's advocate with investments.

Consider aluminum giant Alcoa (NYSE: AA  ) . Though the metals sector appears to be making a comeback, you'll find that more than a few of the 2,670 Motley Fool CAPS members weighing in on the company offer reasons to be bearish.

Here at The Motley Fool, we like to consider both the good and bad sides of an investment, so in this article, I've highlighted three of the main bearish arguments on Alcoa today. Be sure to read the bullish side, as well, and then weigh in with your own comments below, or rate Alcoa in CAPS.

1. Aluminum oversupply: While demand is looking up, many on Wall Street are pointing out an oversupply of aluminum as inventory levels have reached historic highs. One Goldman Sachs analyst downgraded Alcoa's shares, favoring copper producer Freeport-McMoRan (NYSE: FCX  ) instead. He noted that weak aluminum industry fundamentals could cap prices on the metal and doesn't see much else that could boost shares at this point.
2. Fading China imports: China, while still haggling with Rio Tinto (NYSE: RTP  ) and peers over iron ore prices, has been importing mass quantities of aluminum in recent months. Alcoa's CEO attributed much of the recent aluminum market strength to China's activity, but also warned of a potential slowdown of imports. Aluminum Corporation of China's (NYSE: ACH  ) chairman says the country faces pressure from large aluminum reserves and an increasing number of domestic smelters coming back online.
3. Cash flowing the wrong way: Like domestic steelmakers Nucor (NYSE: NUE  ) and U.S. Steel (NYSE: X  ) , Alcoa has had its share of losses lately. But on top of that, it's taken a play out of Century Aluminum's (Nasdaq: CENX  ) playbook by burning through cash -- it has posted quarter after quarter and year after year of negative free cash flow.

Of course, Alcoa has thrived despite past obstacles. But the question of its future viability is why CAPS is such a great resource to augment your own analysis. To see details of what CAPS members are saying now about Alcoa, just click on over to Motley Fool CAPS and have a look -- or add your own thoughts directly to this story in the comments box below.