Former Blue-Chip Alcoa Is a Steal at $9

by Sam Collins | November 12, 2013 1:39 am

Alcoa (AA[1]) — Last week, the world’s largest aluminum producer (by revenue) unveiled its business plan for the next three years in which it says it expects to generate $2.2 billion in incremental revenue growth from two of its main divisions with $1.8 billion coming through share gains and innovation.

The company is on track to generate $1.8 billion in revenue for the 2010-2013 period on gains in market share “at historically high” levels of profitability and innovation.

Analysts’ consensus estimates are for earnings of $0.34 per share this year and $0.42 in 2014. But if management’s goals are met, it is likely that earnings will be revised sharply higher.

In mid-October the stock broke through its bearish resistance line at $8.50 on a huge increase in volume. It ran to a new 52-week high of $9.97 on Nov. 4, and it flashed a golden cross (50-day moving average bullishly crosses through 200-day moving average).

Since then, profit-taking has driven it back to $9. On Thursday, it signaled a buy from our proprietary internal indicator, the Collins-Bollinger Reversal (CBR).

AA should be bought as a long-term investment that could profit handsomely from an expanding world economy.

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