Alcoa Corp (NYSE:AA) Performed Well in September Despite Weak Prices
The weak aluminum prices recorded in the last ten days of September had minimal impact on Alcoa Corp (NYSE:AA) stock, which ended the month 6% higher. This was unique given that the company’s main competitor Century Aluminum Co (NASDAQ:CENX) lost about 15% in value over the same month.
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Alcoa had a good September despite weak aluminum prices
The company is widely diversified
Spinning off Arconic was a good decision
The reason Alcoa finished September so strong despite weaker aluminum prices was because the company is widely diversified in the aluminum value chain. On the other hand, a company such as Century Aluminum solely produces aluminum, which is the main reason why its stock tanked when aluminum prices registered a steep decline in the last days of September.
Alcoa is the world’s largest miner of bauxite as well as the largest refiner of alumina globally. Therefore, when the aluminum prices nosedived the company simply generated value from its other operations given that it is also a supplier to other aluminum companies such as Century.
It’s also important to note that Alcoa was a more diversified company before its split with Arconic Inc (NYSE:ARNC) in November 2016. Arconic currently manufactures specialty parts for the transport industry as well as producing other metals such as titanium.
Spinning off Arconic was a strategic decision for Alcoa as this move allowed it to focus on its core competency within the aluminum industry and to generate positive results for its investors. Arconic on the other hand is a maker of specialty parts, which is its core competency, while operating in three segments, which are: Global Rolled Products, Engineered Products and Solutions, and Transportation and Construction Solutions.
Before the split, Alcoa focused on growing its aluminum business by cutting costs and improving operational efficiency. When the company split with Arconic, it was ready to dominate the aluminum industry, which is the reason why the company is currently a global leader in the same industry.
The question on most investors’ minds is whether Alcoa is a good investment at its current valuation for both dividend and growth investors.
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