Alcoa Corporation is a mining and production company of aluminum, as well as bauxite and alumina. Besides that mining, it owns seven bauxite mines and provides smelter grade alumina to manufacturers to several countries and regions. This company and along with others provide us with items as simple as aluminum foil, all the way to industrial grade items. This company certainly is at the mercy of raw material prices as this can influence profit potential. Also, demand is another driving factor. Enough about the company’s general information, let us take a look at the health of the company to see if it is a solid fit for your portfolio.
We’re going to take a look at this company use only technical analysis, as the chart can provide a variety of information. However, I do not recommend using strictly technical or fundamental analysis, but rather a mixture of both.
The chart has show that is broke a resistance area between $25 and $26, which had been tested multiple times. Price did eventually end up breaking the resistance area, but did so on falling volume. After the breakout, price went sideways, creating a support level that has been tested twice, around the $28.50 area. It currently is in a range and this might be a great time to pay close attention because a break in either direction could signal a profit potential. So in the current situation, I would recommend waiting for price to break out of the current channel, which then could provide a larger movement in one direction.
Being in an industry that is dependent upon raw materials such as aluminum can make for a very volatile business. Here are a few risks to keep in mind before investing in this company. First, the company is subject to raw material price fluctuation, which could adversely affect the company’s numbers. Similar to the oil industry, if price begins to fall, it cause profits to drop and any company who is not prepared will certainly fail. Secondly, demand for the products can certainly have an adverse affect on the company. Without factories and producers needing the raw materials, there is no demand, which means no incoming cash flow. Lastly, the overall market conditions, if detraining, can negatively affect the company. Companies may begin slowing production, reducing demand for aluminum materials.
Many people say only invest in what you understand. This industry is complex and there are many moving parts. I highly recommend you take the time to understand what entails investing in a company such as this. If you don’t have the time, speak with an investing professional as they can lead you in the right direction.
This story impact on price volatility cannot be determined at this time. Please check this story after some time to allow current data to be analyzed.
Alcoa is rated below average in return on asset category among related companies. Return on Asset or ROA shows how effective is the management of the company in generating income from utilizing all of the assets at their disposal. It is a useful ratio to evaluate the performance of different departments of a company as well as to understand management performance over time.