Friday, May 21, 2010

Time to Buy Alcoa (NYSE:AA)?

Since the early part of 2009, Alcoa (NYSE:AA) has dropped from almost $18 a share to between $11 a share and $12 a share today. Most of this has come from a decrease in demand for aluminum, which has cause aluminum prices to plunge.

There can be no doubt that aluminum prices will rebound, as demand will ultimately return for the lightweight metal, and the prices will rise along with Alcoa's share price.

Add to that there will be an increase in aluminum demand from the aluminum ETFs, which are expected to launch later this year, and it creates another market for the metal that hadn't existed before, as they will hold physical aluminum to back up the funds.

Rusal already has problems providing what is needed, and it is expected that Alcoa will make up a lot of what they aren't able to provide.

Alcoa is cheap now, and while we don't know how far it may drop, as economic news has been somewhat grim, those looking for a sure long-term play could do very well with Alcoa, and buying them at this price, at this time, won't harm anyone with a long-term commitment.

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