Is This Aluminum Producer Cheap Enough Yet? – Alcoa Inc. (AA), Exxon Mobil Corporation (XOM), Aluminum Corp. of China Limited (ADR) (ACH)

Alternatives

The alternatives for those who are considering Alcoa are its Chinese alternatives such as Aluminum Corp. of China Limited (ADR) (NYSE:ACH); and other metal plays such as copper, like Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX).

I think Aluminum Corp. of China Limited (ADR) (NYSE:ACH) is a very speculative way to play aluminum.  The company is forecast to lose money for the next three fiscal years.  While this stock could produce great profits long-term, it is simply not worth the risk.  In general I don’t recommend playing China through individual stocks for this very reason.

Freeport-McMoran mines for Copper and Gold, giving investors exposure to the ultimate hedge, gold, while providing the same kind of play on infrastructure growth that would lead to increased copper usage.  I love Freeport as a company; however, I believe it is a bit overvalued at the current share price of around $32.  With two big pending acquisitions and uncertain copper demand, I don’t believe the risk is adequately priced in to create a good entry point.

Conclusion

As far as a pure aluminum play goes, Alcoa is a great way to play the growing infrastructure and transportation needs around the world.  Historically, Alcoa trades at around 16-17 times earnings, so if the consensus is correct, Alcoa could easily be a $15 stock in a couple of years.

The article Is This Aluminum Producer Cheap Enough Yet? originally appeared on Fool.com and is written by Matthew Frankel.

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