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Ranking the 10 Best Stocks for 2012

8 of 10 experts' picks are at double-digit gains year-to-date

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No. 4: Alcoa

Alcoa AACurrent Return: +19%
Jeff Reeves

My personal pick for the Best Stocks for 2012 lineup is Alcoa (NYSE:AA). My thesis was a simple one — the valuation was great, the company already had flopped dramatically from pre-recession levels and streamlined its way back to profitability, and there really was nothing but upside considering that aluminum has a certain baseline demand built in. If Alcoa wasn’t at the bottom in December, I reasoned, it was pretty darn near the bottom.

That buy was very well timed, with Alcoa soaring 19% so far to start out 2012. Most recently, Alcoa earnings showed a quarterly loss (as expected) but offered encouraging revenue increases. What’s more, aluminum prices remain at rock bottom — and Alcoa has continued to adjust production to ensure supply is as thin as possible. That means there really is nowhere to go but up as demand increases and prices rise.

OK, that’s an oversimplification. A shock in Greece and continued weak demand from the housing and manufacturing sectors could cause aluminum demand to remain at ultra-low levels for years to come. But there are reasons to be cautiously optimistic about the recovery, and bullish on Alcoa after its previous troubles in 2011.

Disclosure: Jeff Reeves owns a personal position in Alcoa stock.

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