Alcoa Inc (AA): Going Long on the Dow (.DJI)’s Most Shorted Stock

The Foolish final take

The less-than-stellar results of the past few years may have you doubting whether or not aluminum is an industry you want to invest in. When those doubts creep into your head remember these things. Alcoa has the longest history and possibly the greatest stability of any aluminum company on Earth. Its profits have dipped in the past few years, but the company is still very much in the black. The same cannot be said for Chinese aluminum giant Chalco, which lost over $1.3 billion dollars last year. The current financial condition of Alcoa, as measured by working capital, is solid. Alcoa’s balance sheet has more than a little bit of debt, but management has been taking steps to significantly reduce this burden. Times may be tough now for the aluminum industry, but the incredible importance of products made from aluminum all but ensures the industry’s survival. Alcoa’s 125 years of operations have given it knowledge and experience that other companies can only dream of having. This knowledge has allowed it to achieve margins better than any aluminum company I could find on fool.com.

The current condition of the aluminum industry may not bode well for the weaker aluminum companies, but Alcoa is not just another aluminum company. It is the Hercules of aluminum companies. If any American companies are still profitably producing aluminum in 50 years, Alcoa will be among them. So consider buying some shares of Alcoa and holding them for a couple decades.

The article Going Long on the Dow’s Most Shorted Stock originally appeared on Fool.com and is written by Ryan Palmer.

Ryan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.