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Arconic Corporation: Risk Factors

Jun. 01, 2020 10:57 AM ETArconic Corporation (ARNC)2 Comments


  • The recently listed Arconic Corporation has witnessed insider buying and is labeled as an outperformer by many analysts.
  • The company faces many headwinds in 2020, and some of these can blow very hard.
  • COVID-19, overreliance on one large customer, and a few other risks have the potential to drag its performance this year.
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When does money run out of time? The countdown begins when investable assets pose too much risk for too little return; when lenders desert credit markets for other alternatives such as cash or real assets. - Bill Gross

Recently listed Arconic Corporation (NYSE:ARNC) witnessed a spurt in its price after five insiders picked up its shares. For those not familiar with the stock, ARNC is a provider of aluminum sheets and extrusions to the automotive, aerospace, transportation, and construction industries. It has recently been spun off from its parent, Howmet Aerospace (HWM).

Is it wise to follow the herd and buy ARNC now because many analysts are bullish on it? At a time when the market's getting inflated because of a COVID-19 bubble?

On April 15, 2020, I had reported in The Lead-Lag Report that a COVID-19 bubble was expected, tweeted about it, and even published a piece here.


Image Source: Twitter

Given that ARNC is a recent listing that is thriving in a bubble, investors need to understand if it is good enough for an investment. I urge all investors to consider the following risks the company faces:

Risk Factors

1. COVID-19 Risks

The company has admitted that the nature and extent of COVID-19's impact cannot be measured now. There's a lot of uncertainty about the business, and if the disruption drags on for a long time, it will have a material impact on the company's finances.

As per one SEC filing, several of its customers in the automobile and aerospace industry have temporarily suspended operations, and it is not clear how many have reopened at the time of writing this post.

The COVID-19 disruption should continue till we develop a vaccine, an effective treatment, or herd immunity, whichever comes first. To cope with the uncertainty, the company has

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This article was written by

Michael A. Gayed, CFA profile picture
5x Dow & Founders Award Winner. Risk-On/Off $RORO, Junk-On/Off $JOJO, & $ATACX Portfolio Manager. Anticipate Crashes, Corrections, & Bear Markets With The Lead-Lag Report. Sign Up For 2 Weeks Free.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

This writing is for informational purposes only and Lead-Lag Publishing, LLC undertakes no obligation to update this article even if the opinions expressed change. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. It also does not offer to provide advisory or other services in any jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Lead-Lag Publishing, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

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Comments (2)

As you say ARNC is a quality stock (I’d say company). It was dirt cheap (price to sales) following the spin, probably because of confusion regarding Howmet and Arconic.
Anyway if you believe Arconic will survive the covid19 trauma to its customers and markets then buying ahead of the recovery is a sure way to make $$$
cdgingrich profile picture
TERRIBLE article. I was hoping for some actual insight.
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