You stated that "Alcoa has about 25% lower costs than its Chinese rivals due to its positioning in South America and Russia."
Why is that the case? Aluminum production is mostly the matter of consuming electricity. Does these other countries have cheaper energy or cheaper electricity? Why? Could you elaborate?
Alcoa Kicks Off Earnings: Some Numbers That Don't Add Up [View article]
It is also wrong for Karl to judge AA, or any manufacturing company's valuation purely based on current P/E ratio. What about book value? What about future profit potentials?
AA's latest quarter reports sales revenue of $4.6B and income of $73M. So the income of selling aluminum is merely 1.6% of the sales proceeding. That's a very insignificant percentage not much higher than roughing or statistics error or even the fluctuation of foreign exchange rates. Just think about what if instead of 1.6%, but rather 16% of the sales proceeding goes into profit, how much should AA's P/E be then?
The price of aluminum itself goes up or down more than 1.6% a day. So it is rather insignificant to argue that only 1.6% of the sales proceedings goes into profit. This number could change very drastically by the next few quarters.
I am not quite interested in aluminum play because the earth has a virtually unlimited natural resource for aluminum production. It's all a matter of turning electricity into the aluminum metal, with no company owning the dorminant technology.
So the up side of aluminum is limited comparing with other, more scarce natural resource play, like my favorite palladium and tellurium. This is why I always maintain holding SWC position at at least 50% of my portfolio. That's how strongly I feel about scarce natural resource plays.
Alcoa Kicks Off Earnings: Some Numbers That Don't Add Up [View article]
Karl:
Your article suggests that there are some numbers in AA's quarterly report that are inconsistent and hence suspicious or untruthful. Questioning the numbers of a company's quarterly report "does not add up" is a serious accusation. However your article fails to point to any single number in AA's quarterly report that is inconsistent or suspicious.
So exactly which ones of AA's numbers do not add up?
The only thing that does not add up is your article. The content of your article does NOT add up to its title. AA's quarterly report is truthful and consistent within itself, with no ground for suspicion.
You have been very wrong on US dollar and on the direction the equity market is moving, by "short the phone book". The world does not want our dollars. But the world want US products. The world economy, leading by the China recovery, will thrive. The world wants basic materials. AA produces aluminum, a base metal traded and wanted the whole world around. It does not matter where AA is located, in the USA or in China or in any where. The aluminum is the same aluminum regardless who produces it. So as long as the world wants to have aluminum, AA will have value. And that valuation has nothing to do with the demise of the US dollar. AA's valuation could only go higher measured in US dollar, as the value of dollar moves lower.
I have no position in AA as I have better long plays. But I just find Karl's thesis completely wrong. Bottom line is that the world reject certain things from the USA but want certain things from US. Read the comment section here to understand why: seekingalpha.com/artic...
Now Is The Time To Buy Alcoa [View article]
You stated that "Alcoa has about 25% lower costs than its Chinese rivals due to its positioning in South America and Russia."
Why is that the case? Aluminum production is mostly the matter of consuming electricity. Does these other countries have cheaper energy or cheaper electricity? Why? Could you elaborate?
Alcoa Kicks Off Earnings: Some Numbers That Don't Add Up [View article]
AA's latest quarter reports sales revenue of $4.6B and income of $73M. So the income of selling aluminum is merely 1.6% of the sales proceeding. That's a very insignificant percentage not much higher than roughing or statistics error or even the fluctuation of foreign exchange rates. Just think about what if instead of 1.6%, but rather 16% of the sales proceeding goes into profit, how much should AA's P/E be then?
The price of aluminum itself goes up or down more than 1.6% a day. So it is rather insignificant to argue that only 1.6% of the sales proceedings goes into profit. This number could change very drastically by the next few quarters.
I am not quite interested in aluminum play because the earth has a virtually unlimited natural resource for aluminum production. It's all a matter of turning electricity into the aluminum metal, with no company owning the dorminant technology.
So the up side of aluminum is limited comparing with other, more scarce natural resource play, like my favorite palladium and tellurium. This is why I always maintain holding SWC position at at least 50% of my portfolio. That's how strongly I feel about scarce natural resource plays.
Alcoa Kicks Off Earnings: Some Numbers That Don't Add Up [View article]
Your article suggests that there are some numbers in AA's quarterly report that are inconsistent and hence suspicious or untruthful. Questioning the numbers of a company's quarterly report "does not add up" is a serious accusation. However your article fails to point to any single number in AA's quarterly report that is inconsistent or suspicious.
So exactly which ones of AA's numbers do not add up?
The only thing that does not add up is your article. The content of your article does NOT add up to its title. AA's quarterly report is truthful and consistent within itself, with no ground for suspicion.
You have been very wrong on US dollar and on the direction the equity market is moving, by "short the phone book". The world does not want our dollars. But the world want US products. The world economy, leading by the China recovery, will thrive. The world wants basic materials. AA produces aluminum, a base metal traded and wanted the whole world around. It does not matter where AA is located, in the USA or in China or in any where. The aluminum is the same aluminum regardless who produces it. So as long as the world wants to have aluminum, AA will have value. And that valuation has nothing to do with the demise of the US dollar. AA's valuation could only go higher measured in US dollar, as the value of dollar moves lower.
I have no position in AA as I have better long plays. But I just find Karl's thesis completely wrong. Bottom line is that the world reject certain things from the USA but want certain things from US. Read the comment section here to understand why:
seekingalpha.com/artic...