New York, New York (PressExposure) April 24, 2012 -- Sasha Cekerevac, contributor to financial newsletter and web site Penny Stock Detectives, believes the market drove down the price of aluminum this year by roughly 22%, because of the supply/demand fundamentals. In his recent Penny Stock Detectives article, Cekerevac says that long-term investing is about forecasting the market view several years out. He believes now is a good time to get into aluminum, as the supply/demand fundamentals are shifting in favor of the industrial metal.
"First off, many firms are shutting down production. This will reduce the supply and, as demand remains the same, the market view will eventually shift back into higher prices for aluminum," comments Cekerevac. "The automotive industry is a big user of aluminum and the Chinese and Indian markets are buying vehicles at a record pace every year. That growth will not slow down for decades, providing a great wind at your back for long-term investing."
One company that Cekerevac feels is interesting is Norsk Hydro. "Don't let the fact that it's trading on the pink sheets fool you," says Cekerevac, "it's a direct competitor with Alcoa." Based in Norway, Norsk Hydro is involved in many aspects of the aluminum industry, including production, refining and casting. The firm also provides rolled products worldwide.
According to Cekerevac's Penny Stock Detectives article, the company has a higher profit margin of 7.32%, compared to a profit margin for Alcoa of 2.45%. Norsk also has a return on equity of 9.47%, compared with 4.71% for Alcoa. Alcoa recently came out with better-than-expected earnings, reports Cekerevac. The market view that was negative in this industry has started shifting ever so slightly as this earnings release is being studied. "Could Norsk follow suit," Cekerevac asks? Possibly, but he's looking out several years and seeing that both firms are reducing production and creating an environment for higher prices.
Cekerevac says he would like to see a continued shift in the market view for both companies and the spot aluminum market moving up in price before jumping in. Long-term investing means not rushing to enter and exit positions, but rather studying the market in a logical framework. According to Cekerevac, as the supply and demand equation moves to a deficit, the market view will shift and the price will adjust accordingly, which means it is then time to eye both Norsk and Alcoa.
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