Kofi Bofah

Alcoa: Dead Money Personified

I have never bought, sold short, or held any options on Alcoa. Honestly, I am evaluating the Dow 30 stocks; and Alcoa happens to be the first.

I have held BHP Biliton before, but liquidated this past summer.

I believe that cyclical stocks can be deceptive on the grounds of valuation. The 'E' denominator can get whacked quickly in a downturn and the P/E will rise accordingly. Hence, valuations often appear cheap - just as the cycle is peaking.

Alcoa: Dead Money Personified

I cannot think of another era in which commodity prices have sustained such a rally. No, aluminum prices have not kept pace with the basket; but they have risen, nonetheless.

Ryan Barnes: Why buy AA? Are you buying it based on commodity strength / dividends / as a takeover play? Do you believe that aluminum prices are set to spike?

I personally believe the upside cycle in commodities is long dead. But if I were bullish on commodities, I would look at Big Oil or an E&P play. Rails even, would be another alternative. If I were bullish on metals, I would look at BHP.

In terms of valuation, the P-E will spike when the 'E' denominator plunges. Counterintuitively, cyclical and material stocks often trade at low pe's near the peak.