3 Reasons to Sell Alcoa

In this video, Taylor Muckerman highlights his reasons to sell Alcoa (NYSE: AA  ) . First, the company has little exposure to emerging markets. This means that Alcoa's growth potential is limited to the world's largest economies which tend not to grow as fast as emerging economies. Second, Alcoa faces increased competition from Chinese aluminum producers, which means that China is meeting its domestic needs but also exporting aluminum. Third, there is a worldwide surplus of aluminum that is constraining prices and profit margins.

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.


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  • Report this Comment On April 17, 2013, at 1:50 PM, Alluminati wrote:

    I agree with the overall concern, but not all of #2...

    "China produces lower than market prices" ?

    The LME and SHFE spread is very significant.

    Chinese primary production costs are much higher than AA.

    Importing Chinese aluminum is not an option for manufacturers in the recent/current market.

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