Buying stock in a company like Alcoa (NYSE: AA ) is no sure thing, as the aluminum giant has struggled over the last few years against the global economic malaise and heightened competition from state-backed entities in China and elsewhere.
The consequences of these trends have been twofold. First, the company's earnings per share have plummeted since the financial crisis. According to Finviz.com, the figure has fallen an astounding 44%. Only Bank of America even comes close in this regard with a contraction of 40%. And secondly, the market has turned particularly bearish on Alcoa stock. As you can see in the figure below, a full 6.47% of its outstanding float is currently sold short -- meaning that traders are betting it will go down. This gives Alcoa the disagreeable title of most shorted stock on the Dow Jones Industrial Average (DJINDICES: ^DJI ) .
Does this mean that Alcoa stock is headed down? Not necessarily. In fact, it could well be indicative of a fierce ascent in the future if short-sellers have to cover their positions simultaneously. But either way, the impetus must come from Alcoa itself. In the first quarter of this year, for example, while the company beat expectations on the bottom line, it missed on top-line revenue estimates. For any type of short-squeeze situation to materialize, it will have to beat on both. For either current or prospective investors in Alcoa stock, in turn, the most important thing is simply to know where it stands in the market.
Want to learn more about Alcoa stock?
Materials industries are traditionally known for their high barriers to entry, and the aluminum industry is no exception. Controlling about 15% of global production in this highly consolidated industry, Alcoa is in prime position to take advantage of growth that some expect will lead to total industry revenue approaching $160 billion by 2017. Based on this prospect and several other company-specific factors, Alcoa is certainly worth a closer look. For a Foolish investment perspective on this global giant, simply click here now to get started.