Steven Romick Adds to Stake in Alcoa

Weak aluminum prices are likely to have influenced guru

Author's Avatar
Apr 20, 2016
Article's Main Image

Guru Steven Romick added 6,932,590 shares to his stake in Alcoa Inc. (AA, Financial) in the first quarter.

Alcoa was founded nearly 128 years ago on Oct. 1,1888, as the Pittsburgh Reduction Company. The company was based on technology developed by Alcoa's co-founder, Charles Martin Hall.

Alcoa is the global industry leader among companies that engineer and manufacture lightweight metals. Alcoa produces aluminum, titanium and nickel, which are used in aircraft, automobiles, commercial transportation, packaging, oil and gas, defense and industrial applications. Alcoa produced the first aluminum kettle, introduced aluminum foil to the world as well as aluminum furniture, the first aluminum wheel on a modern passenger car and aluminum cans with pull tab rings that could be opened by hand instead of with a can opener.

Alcoa is known as the most admired metals company in the world, according to Fortune magazine. Alcoa also receives top ranking for sustainability and innovation. Alcoa has been on Fortune’s Most Admired list for 29 consecutive calendar years.

Alcoa has a market cap of $13.85 billion, an enterprise value of $23.17 billion, a P/B ratio of 1.14 and a dividend yield of 1.15.

Alcoa is also traded in Argentina, Australia, Chile, Germany, Mexico, Switzerland and the U.K.

02May2017170812.png

Romick is a contrarian value investor who graduated from Northwestern University with a bachelor's degree in education. Romick began his investment career shortly after graduation working as a security analyst for Kaplan, Nathan & Co. From there, Romick ran into some fortuitous luck when he was offered the opportunity to work for FPA Funds where he learned how to defensively manage a portfolio as a value investor.

Below is a Peter Lynch chart for Alcoa.

02May2017170812.png

Romick may have decided to increase his stake in Alcoa because the company has nearly 128 years of experience in its industry. Aluminum prices are also low, partially due to a reduction in China's economic growth that has led China to an excessive supply of metals, devaluing the price of aluminum and affecting Alcoa's business.

Alcoa is a company that has been dealing with some tougher times due to declining aluminum prices, a large part of its business. If aluminum prices get back to where they were setting records in 2008, the company's share price could potentially skyrocket which could be a part of the reason for Romick's decision to add to his stake in Alcoa.

Cheers to your investment success.