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Pendulum

 
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  • Alcoa's Stock Price Diverging From Aluminum Prices: Is It Sustainable? [View article]
    Thank you.
    Dec 2, 2013. 10:34 AM | Likes Like |Link to Comment
  • Alcoa: Awaiting An Answer To 'Bounce Or Breakdown?' [View article]
    Hi Trendyglitz,

    Thanks for the comment.
    Sep 3, 2013. 08:50 AM | Likes Like |Link to Comment
  • Alcoa: Awaiting An Answer To 'Bounce Or Breakdown?' [View article]
    Hi haleiwahu,

    Thanks for the comments.

    I don't blame Alcoa for what is going in. I agree "They have done nothing wrong. "

    They are in a cyclical business and this is the downside of the cycle because of too much supply.
    Sep 3, 2013. 07:54 AM | 1 Like Like |Link to Comment
  • Breach Or Breakdown For Alcoa As Weak Aluminum Overshadows Downstream Success [View article]
    Hi JakeBlade,

    Thanks for pointing this out. It looks like both of these directors have been buying every few months. It is good to see directors buying stock, but I am not sure that the timing of the purchases means much.

    http://yhoo.it/wlSZNo
    Aug 8, 2013. 12:58 PM | Likes Like |Link to Comment
  • Breach Or Breakdown For Alcoa As Weak Aluminum Overshadows Downstream Success [View article]
    Hi, I closed the Alcoa trade. Bounce not convincing enough for me. However, I am still long Alcoa calls. I don't usually, mention trades here, but wanted to close the loop.

    Please note that my articles and comments are NOT investment advice. Every investor needs to make their own decisions based on their own research and other factors. See the disclaimer above and in my bio.
    Jul 16, 2013. 01:18 PM | Likes Like |Link to Comment
  • Breach Or Breakdown For Alcoa As Weak Aluminum Overshadows Downstream Success [View article]
    Hi Hardrock48,

    Thank you for your comments. You bring up very good points.

    I understand the position that it is better to break up Alcoa to unlock shareholder value.

    However, I don't think it is likely at this point. Management probably doesn't want to lose the place in the Dow 30. The company already faces questions about staying there because of the share price performance and the downgrade. Splitting the company seems like a catalyst to get it removed from the Dow 30, which management probably doesn't want.

    In any case, I base my view of the company on its current structure. It may have more value in a different structure, but I don't see that happening in the near term.
    Jul 12, 2013. 11:42 AM | Likes Like |Link to Comment
  • Breach Or Breakdown For Alcoa As Weak Aluminum Overshadows Downstream Success [View article]
    Hi Cyber Investor,

    Thanks. There are many others that are pessimistic on Alcoa, so you are not alone. This is just a trade and I may sell quickly if it works against me and I may not hold it for a long time even if it works. My thesis has been that $8 for Alcoa and $1,800 for aluminum are important levels. If the markets hold above them, I am willing to take the trade.

    Long term, I am waiting for a big move when aluminum turns. I am not saying that that inflection point is now.
    Jul 12, 2013. 11:13 AM | Likes Like |Link to Comment
  • Breach Or Breakdown For Alcoa As Weak Aluminum Overshadows Downstream Success [View article]
    Hi Cyber Investor,

    Thanks for your comments. I understand your position.

    By the way, I added a long position in Alcoa today (previously I was long call options and now I added a position in the shares). If the metals are going to bounce and Alcoa stays above $8, I am in for a trade.
    Jul 11, 2013. 10:16 PM | Likes Like |Link to Comment
  • Breach Or Breakdown For Alcoa As Weak Aluminum Overshadows Downstream Success [View article]
    Hi Hardrock48,

    Thanks for your comments.

    I want to clarify my comments about the balance sheet. The company has a lot of leverage, especially if the pension obligations are added, as I show above. This is a risk. I don't want to give the impression that I think the balance sheet looks good. However, my comments about the low risk of bankruptcy in the next few years has to do with the maturity profile of the debt and the fact that the company does not face significant near term maturities. That is why I think that the company has time.
    Jul 11, 2013. 09:26 AM | Likes Like |Link to Comment
  • Breach Or Breakdown For Alcoa As Weak Aluminum Overshadows Downstream Success [View article]
    Hi Cyber Investor,

    I consider the risk of going out of business very low in the next few years. Please keep in mind that it could also raise more equity, if needed (and dilute shareholders), or sell assets. However, I consider that risk very low too. An analyst asked the company about this on the previous conference call.

    Alcoa has a lot of time with its current capital structure.

    Far into the future anything can happen and I don't want to speculate about more than a few years out. There is the possibility that most companies will go out of business eventually.

    The stock price may decline, but the risk of going out of business in the next few yeas is very low.
    Jul 10, 2013. 12:41 PM | Likes Like |Link to Comment
  • Breach Or Breakdown For Alcoa As Weak Aluminum Overshadows Downstream Success [View article]
    Hi AlessandroDiRoma,

    Thanks for your comments.

    On the last conference call, Alcoa's management said that based on their conversations with investors they want exposure to the commodity price.
    Jul 10, 2013. 12:30 PM | Likes Like |Link to Comment
  • Breach Or Breakdown For Alcoa As Weak Aluminum Overshadows Downstream Success [View article]
    Hi Cyber Investor,

    Thanks for the comments.

    Regarding China, I agree that the overcapacity there is an issue. It will be interesting to see if that gets in line with reality due to the new policies of the Chinese government and the central bank. However, many of the aluminum companies seem to think that the supply/demand dynamics in China are separate from the rest of the world. I am not sure if this is true or not, but worth noting.

    The risk of Alcoa going out of business is low. Alcoa does not have meaningful near term debt maturities. That means that it has a lot of time. At some point, the price of aluminum will bounce back. It is cyclical and cycles repeat. Prices go down, cut capacity, prices go up. The demand dynamics are strong for aluminum and I expect that to continue. I don't know when the inflection point will materialize, but I am following Alcoa and waiting for it.
    Jul 10, 2013. 12:27 PM | Likes Like |Link to Comment
  • Breach Or Breakdown For Alcoa As Weak Aluminum Overshadows Downstream Success [View article]
    Hi Gumby,

    Thanks for your comments. I agree that if aluminum prices continue to fall then supply will come out of the system, which already seems to be happened. Eventually this will support the price. Unfortunately, I am not sure of the timing. I am following Alcoa closely (and have a long position through options) to try and benefit from this inflection point when it occurs.
    Jul 9, 2013. 10:57 AM | Likes Like |Link to Comment
  • Breach Or Breakdown For Alcoa As Weak Aluminum Overshadows Downstream Success [View article]
    Hi Hardrock48,

    Thanks for your comments.
    Jul 9, 2013. 10:08 AM | Likes Like |Link to Comment
  • Impact On Alcoa From Aluminum Below $1,800: Breach Or Breakdown? [View article]
    Hi Ponchovilla,

    There are certainly red flags with the company's financials. Please see my previous articles that discuss the company's debt and credit ratings in more detail.

    I said in my opening thesis: "Alcoa has a lot of debt and is marginally cash flow positive, so the price of aluminum is the key driver of Alcoa's overall profitability and the stock price."

    If aluminum prices rise enough, then the company's financial profile will look much better. If aluminum drops, or stays at this level for an extended period, Alcoa will have problems, especially on the debt side. It doesn't have substantial short term maturities, so it has a lot of time for things to improve. The major swing factor is aluminum prices, which is my focus.
    Jun 27, 2013. 06:45 PM | 1 Like Like |Link to Comment
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