Alcan Aluminum (AL.TO) Buy, Sell or Hold

Alcan Aluminum (AL.TO)

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DON'T BUY

Trading at book value now and historically, you are supposed to just buy it. But that's in an economic trough which it isn't. An economically sensitive business and is being piched by high energy and input costs. Aluminum has now pulled back to $0.80. AT this time, you don't want to be in that pocket.

DON'T BUY

Had trouble with the integration of Pechene. Feels aluminum prices are going lower in the next year or two. Excess supply is developing. A good well run company longer term.

DON'T BUY

There's lots of overcapacity in that business and the economy may be slowing down a bit. Competition from China. Their European acquisition is a problem because you can't get rid of people right away for any cost savings.

STRONG BUY

Getting close to its 5 year lows. China put on a 5% export tax on Chinese companies, but that didn't do much good, so another charge is being added to that. Given the long term demand/supply situation, the inventory problems will be short lived and this is a great buy.

WEAK BUY

Has some profit, but not strong enough to be aggressive on. What he likes about it is that it is less a growth story than it is a value story. It is now just above its price to book level.

BUY

Really undervalued. Kind of a mystery why the stock is so low. Fundamentals are OK. Market and management is pretty good. For the long term, it's a great buy at this price.

TOP PICK

Has liked this for some time, but the stock has been very disappointing to date due to poor aluminum prices. China has been exporting aluminum. Inventory is now down to 6.6 weeks, the lowest ever. China is adding additional taxes to discourage exports. Stock is cheap at under 10 X this year's earnings and 7.5 next year's.

WAIT

Aluminum is one of the commodities where there is a fair amount in the world. May be into a bottoming phase here. He is looking at it a lot more closely, but is concerned that they have to have some decent earnings coming out of the company in the near term.

TOP PICK

Inventories of aluminum is at all time lows. Feels there is going to be big consumption of basic materials. If you are going to buy a world class company, you should buy when things are not great.

HOLD

Aluminum prices are at a peak and as the global economy slows down earnings are going to start to come down. Has really underperformed the group.

COMMENT

Doesn't have a significant view on this stock. If he was taking a bullish stance he would buy the CALL options because they have limited risks. If bearish, he would buy the PUTs.

TOP PICK

Model price of $50.81 which is a 36% differential.

PAST TOP PICK

(A Top Pick Dec 30/04. Down 27%.) Still likes. You will make money in the next 2/3 years.

BUY

Has a lot of competition. Haven't taken out a lot of the costs that the market had expected. Getting lower and lower margins on a lot of their businesses. A very cyclical story. Try to buy between $30 and $40. A trading stock.

BUY

Getting to be interesting at these levels. Debt levels have improved since the spun off Novelis (NVL-T). The input costs which have been killing the company are not as serious as they once were. Valuation is around book value.

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Alcan Aluminum (AL.TO)