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Alcoa Stock-To-Aluminum Price Ratio At Recent High Level

Tyler Durden's picture





 

As everyone is waiting for Alcoa's stock price report later today, it is worth noting that the company's Stock Price-To-Aluminum Price ratio has hit a one year high: the last time this relationship was at 0.78, the stock proceeded to plummet almost straight line to its low reading of 0.4. Granted, last time around China did not have a rampaging multi trillion credit bubble. Yet the stickiness of aluminum prices has been troubling: Alcoa's top line may be a key determinant of how this earnings season progresses, and is precisely what most pundits will be focusing on.

 


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Wed, 10/07/2009 - 14:06 | Link to Comment Steak
Steak's picture

Its just one guy's opinion, but I don't think earnings will matter one iota in the context of this market.  As long as the CEO makes vague prognostications of a bottoming out in a couple quarters then the income side of things can take a seat.

This chart definitely adds some helpful perspective on just how rediculous valuations have become. 

Second derivatives piss me off.

Wed, 10/07/2009 - 14:12 | Link to Comment Gilgamesh
Gilgamesh's picture

Over/Under on the words "bottom" and "cautiously optimistic" in the release and CC?

Wed, 10/07/2009 - 14:23 | Link to Comment lizzy36
lizzy36's picture

depends on length of total release.

but i am going to guess that either or both words will appear in every 3rd sentence.

Wed, 10/07/2009 - 14:30 | Link to Comment Steak
Steak's picture

Oh I think they're gonna go for gold on this one.  They have a fledgling consumer electronics segment I'm sure they'll talk up to no end.  With regard to cars all they have to say is "clunkers" and analysts will pee their pants with excitement.  And on their outlook, in July they used the phrase "hand to mouth" to describe the industry.  So any upgrade of that assesment will likely lead to Kudlow spontaneously climaxing on air and Leisman giving Summers a hand shandy (its their personal version of a high-five).

So with that said, I'd give 10-1 odds AA is quite rosy in their outlook.

Wed, 10/07/2009 - 14:14 | Link to Comment ghostfaceinvestah
ghostfaceinvestah's picture

I appreciate this site for all it does, and for pointing out the disconnect between valuations and fundamentals, but like everything you need to get the timing right.  You are correct, fudamentals don't matter now, as they didn't in 1999, or 2007.

But they will.  the stock market is in a bubble today.  It may not look like a bubble, at S&P 1000, versus a high of 1500, but it is in a bubble.  And that bubble will continue to inflate as long as the Fed pours rocket fuel into the fire.  They still have another $500B to print through March to buy MBS.  that is a shitload of money.  Before this, that would have been an enormous annual deficit, and the Fed is just going to print it.

But once the Fed is done, look out below, you are going to have a chance to short this bubble the likes of which you haven't seen since March 2000.  think shorting the NASDAQ at 5000.

The higher it goes from here, the more years you are going to be able to add onto your retirement time, because it will just fuel the way down.

I rarely bet on the stock market, but I am getting giddy thinking of the short opportunity that is going to come when the liquidity dries up.

Wed, 10/07/2009 - 17:05 | Link to Comment Anonymous
Wed, 10/07/2009 - 20:15 | Link to Comment Translational Lift
Translational Lift's picture

Approximately 31% of all aluminium produced in the US comes from recycled scrap. Scrap aluminum requires only 5% of the energy used to make new aluminium.

Thu, 10/08/2009 - 11:03 | Link to Comment Gilgamesh
Gilgamesh's picture

Don't have the link handy, but I believe I saw a >30% cut in input costs.

Wed, 10/07/2009 - 14:07 | Link to Comment ghostfaceinvestah
ghostfaceinvestah's picture

Don't worry, they will drop prices further and make it up in volume, just like the dot-coms did.  Maybe they will be able to "monetize" the "eyeballs" on their website.

Such fundamental valuation as yours has no place in a liquidity-fueled asset bubble like today's stock market.

Wed, 10/07/2009 - 14:08 | Link to Comment Bearish Spirits
Bearish Spirits's picture

Didn't China come out several days ago and declare they were done stockpiling aluminum for the near-term?  I honestly thought that would hold Alcoa down, along with its schizo cousin CENX.  I guess not.

This reeks of a dump on anything other than great earnings news.  Such as this stalwart member of the Dow 30 actually producing a profit.

Last I saw, expectations were for -.11/share.

Wed, 10/07/2009 - 14:10 | Link to Comment TumblingDice
TumblingDice's picture

I think companies know that as long as they reach for the moon for their Q4 and 2010 Q1 earnings, they should be fine.

Wed, 10/07/2009 - 14:12 | Link to Comment Yossarian
Yossarian's picture

Shouldn't it be stock price per unit of aluminum capacity to aluminum price?  Or mkt price per unit of production versus aluminum price? 

Wed, 10/07/2009 - 14:15 | Link to Comment Anonymous
Wed, 10/07/2009 - 14:28 | Link to Comment Anonymous
Wed, 10/07/2009 - 14:58 | Link to Comment THE MOGUL
THE MOGUL's picture

Something to consider is an Aluminum ETF, which is coming to the market!

check it out:  http://etfdailynews.com/blog/?tag=aluminum-etf

 

 

Wed, 10/07/2009 - 15:47 | Link to Comment Anonymous
Wed, 10/07/2009 - 16:10 | Link to Comment Carina
Carina's picture

Revenue down 33% yoy and capital expenditures on track to be reduced 50% - GREEN SHOOTS!

Wed, 10/07/2009 - 16:15 | Link to Comment Bearish Spirits
Bearish Spirits's picture

They beat in positive territory!  Green shoots!  Don't ask questions about how they did it.  Weak dollar?  China stockpiling?  Job cuts?  Doesn't matter.  Dow +200 and party on...

Wed, 10/07/2009 - 18:16 | Link to Comment Anonymous
Wed, 10/07/2009 - 16:15 | Link to Comment Anonymous
Wed, 10/07/2009 - 16:28 | Link to Comment alien-IQ
alien-IQ's picture

From Alcoa earnings release. What most stuck out for me:

"Revenues for the first nine months of 2009 were $13.0 billion, compared to $21.2billion in the first nine months of 2008. Income from continuing operations for the first nine months of 2009 showed a loss of $719 million, or $0.78 per share,
compared with income of $1.2 billion, or $1.40 per share, in the first nine months of 2008. The nine months of 2009 showed a net loss of $874 million, or $0.95 per share, compared to net income of $1.1 billion, or $1.35 per share, in the first nine months of 2008. "

In other words...YOY it was a train wreck. The stock should soar now.

Wed, 10/07/2009 - 16:49 | Link to Comment bugs_
bugs_'s picture

"Less Worse" has been supplanted by "Surprisingly

not awfull".

Wed, 10/07/2009 - 17:17 | Link to Comment Whizbang
Whizbang's picture

Leading to our new term: Suprisingly not as worser.

Wed, 10/07/2009 - 17:34 | Link to Comment Icarus
Wed, 10/07/2009 - 17:35 | Link to Comment Anonymous
Wed, 10/07/2009 - 19:22 | Link to Comment Icarus
Icarus's picture

Not the only reasons: You forgot their -22.4% effective tax rate in Q3.

Wed, 10/07/2009 - 17:50 | Link to Comment reading
reading's picture

Nobody cares why.  I am officially converted.  Tomorrow I will buy every piece of *hit stock I can find and never think about it again.  They all say it.  The market will not go down, not ever too many managers chasing performance.  Y-o-Y be damned it's time to go all in...

 

Finally, a captcha question that didn't require a calculator

Wed, 10/07/2009 - 18:02 | Link to Comment Anonymous
Wed, 10/07/2009 - 20:28 | Link to Comment Anonymous
Mon, 11/16/2009 - 09:28 | Link to Comment Anonymous
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