What: Alcoa Inc.'s (NYSE:AA) shares fell 15.4% in May, a price move that brought the stock back into negative territory for the year-to-date period through the end of last month. However, there's been a fair amount of volatility along the way, with the shares rallying more than 60% between mid January and late April.
So what: The big driver of the share price decline in May and the 60% rally were largely the same, commodity prices. Starting in the middle of January most commodities began to head higher after a long spell of falling prices. However, that rally cooled off in May, with the price of aluminum declining around 7% during the month.
Now what: At this point, Alcoa remains a special situation investment. A big run up, or decline, in the price of aluminum will push the shares up, or down, but its the break up of the iconic company into two separate businesses that long-term investors are really placing a bet on here. So, if you were attracted to Alcoa because the shares have pulled back on commodity price weakness, make sure you understand the bigger picture before you jump aboard.The big story at Alcoa, however, isn't commodity prices. That's not to say that what Alcoa gets paid for aluminum isn't a key factor in the company's success, but that the company's pending separation into two companies, one that focuses on making high tech parts out of aluminum and other metals (to be called Arconic) and the other than focuses on making aluminum (which will keep the Alcoa name), is going to be the real driving factor longer term.