Last year, it looked like all the iron and aluminum miners would suffer due to the falling prices of aluminum and iron; however, to the surprise of many, Alcoa (AA, Financial) has proved been a great stock to hold in 2014. The stock is up almost 70% year to date, and much of this growth can be attributed to Alcoa’s diversity and new revenue streams. The company successfully offset the fall of aluminum prices by diversifying its business, and it’s the primary reason why it is still a good buy. Let’s take a look at those reasons.
Opportunities in the automobile market
Alcoa’s plan primarily comprises of creating materials in territories in which it can add value and gather premium prices for top of the line applications. One of Alcoa's greatest open doors is in the car segment, where aluminum's lighter weight translates to greater fuel efficiency. Customarily, automakers have faltered to bring more aluminum into their auto bodies, refering to wellbeing concerns in staying with heavier choices like steel.
The launch of the new Ford (F, Financial) F-150, has broken down that long-standing obstruction in auto outline, and it now looks as if different automakers are going to take after Ford's pattern to utilizing the lightweight metal. Specifically, Toyota (TM, Financial) is ready to begin utilizing more aluminum as a part of its extravagance auto lines starting in 2017, as indicated by reports from the Nikkei Asian Review. With more prominent utilization of aluminum in its Lexus vehicles, including guards, entryways, and bumpers, Toyota could cut more than 200 pounds off the weight of every auto. In the event that both auto goliaths have accomplishment with their more prominent utilization of aluminum, Alcoa and its claim to fame auto items stand to increase generously from moving patterns.
Edge over peers
Part of Alcoa's prosperity has originated from keeping up a long haul perspective of the aluminum business' potential. On one hand, Alcoa has settled on numerous corporate choices to rein in generation, shutting smelter offices and briefly covering different operations to do its part to contracting general industry supply and putting a floor under aluminum prices. Then again, even as significant contenders Rio Tinto (RIO, Financial) and BHP Billiton (BHP, Financial) have looked to auction some aluminum resources – generally unsuccessfully – Alcoa has kept its eyes open for good long haul bargains. Alcoa's eagerness to make vital acquisitions will serve it well when aluminum prices at long last recuperate.
Alcoa has done well to make moves in accordance with its general corporate method. The organization's buy of aviation segment maker Firth Rixson for $2.85 billion further accents Alcoa's dedication to the air ship industry. With trillions of dollars of potential new planes because of be implicit the following 20 years, Alcoa's endeavors to be the go-to supplier of tweaked aluminum materials for aviation have a colossal potential to pay off. Furthermore, Alcoa has made moves to guarantee that different materials don't supplant aluminum, with an organization with a Russian maker of titanium serving to enhance Alcoa's item base and helping give aviation clients a solitary stage for everything their needs.
Locally, Alcoa towers over its associates in the business. Be that as it may deft players, for example, Noranda Aluminum and Century Aluminum still represent a danger, as their littler size could bring about a noticeable improvement ready to adjust to changing circumstances all the more rapidly.
Conclusion
With the share price multiplying in under a year, its difficult to see today as an issue time to purchase Alcoa stock. Geopolitical and financial dangers have become more various in 2014, yet that hasn't halted share prices from keeping on climbing. Yet in the event that Alcoa's arrangements happened as expected, then investors may well never show signs of improvement opportunity to purchase the aluminum goliath's stock. From that point of view, even a little pullback like the one we've seen over the previous month is a potential purchasing open door for long haul investors.
