Alcoa Stock Boost

After years of studying the stock market I have found that many companies have big advantages in the industry which has sparked some rumors as well as disappointing investors. Speculation sparked a 6 percent jump in shares of Alcoa a couple days ago, giving Wall Street analysts the opportunity to debate the virtues of consolidation, real or imagined and impatient exit strategy for Alcoa investors. No comments have been made by Alcoa on a report by the Times of London that Australia's BHP Billiton and Rio Tinto are preparing to acquire New York based Alcoa for $40 billion. A BHP spokesperson also declined comments.
Alcoa was the fifth worst performing stock among the Dow Jones Industrials last year. Investors have earned an average return of less than 1 percent, including dividends. All stocks seem to have their good times as well as the bad. The thing that makes Alcoa stand out is the fact that they had a big increase in profits in under a year. Alcoa earned record profits of $2.2 billion last year on sales of $30.4 billion. Last month the company announced a 13 percent dividend increase and said it will repurchase up to 10 percent of the company's stock.

Even though some analysts down-played the chances of such transaction, a spate of mergers among global metal producers in recent years, including a $6 billion acquisition announced this last week, leads some to believe any deal is possible. Sounds like a great stock to invest in. Alcoa shares traded as high as $36.05 before closing at $35 bucks, up $2.10. Over the last 52 weeks, Alcoa shares have traded between $26.39 and $36.96.

Mergers have dominated the metals industry recently as producers, flush with cash and appreciated stock prices scour the globe in search of targets to expand their geographic reach. Few metal industries have been more transformed than steel, which witnessed the combination of Mittal Steel, the world's largest steelmaker, with no. 2 Arcelor. More recently, Indian producer Tata Steel won a battle for European steelmaker Corus Group PLC by bidding $11.3 billion.

Ongoing consolidation spawned a new claimant to the world's largest aluminum producer title, with Russia's OAO Rusal seizing bragging rights from Alcoa. The latest entrant in the sweepstakes is Indian aluminum maker Hindalco Industries LTD., which this week announced an agreement to acquire Novelis, a Canadian aluminum producer, for $6 billion, including the assumption of $2.4 billion of debt.

The interest in Novelis, whose business is similar to Alcoa's downstream operations, caused rumors about BHP and Rio Tinto's alleged interest in Alcoa to resurface. New York analyst Charles Bradford said that everybody has too much money. That's the issue these days. Other analyst weren't as quick to dismiss the speculation, saying either BHP or Rio Tinto has the financial wherewithal to acquire Alcoa. At last week's closing price, Alcoa's common stock has a market value of about $30 billion bucks.

A Morning star analyst Scott Burns, who tracks metals stocks, stated "I wouldn't brush it off". It will be a big deal, don't get me wrong. But both BHP and Rio can do it. They've got a lot of currency. Well this concludes this article stay posted for more stock reviews from me as well as other topics. Thanks for reading.