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RECOMMENDATION: EXTREME BUY and HOLD
DISCLOSURE: Currently I have a position in this stock.
ENTRY POINT: 5/5/20 @ $8.00
SUBSEQUENT: 5/27/20 @ 9.00
AVERAGE PRICE: $8.40
PRICE TARGET: $30+
Use this handy tool to calculate the ROI based on these dates and amounts, and the current price from the table below, or choose your own data points.
Return on Investment (ROI) Calculator
Why this stock? What's the rationale for it at this time?
As with almost all stocks in March 2020, the prices of nearly every issue mandated that we look at anything that was on sale at multi-year and, in some cases, multi-decade lows, as was the case with Alcoa. At nearly $5.16, AA has not seen these prices since 1975! During the last major mining boom leading up to the 2008 crash, AA hit a record high of somewhere around $131 in 04/2001 and again around $110 in 04/2008, before collapsing to around $12 in 2009. You may recall that these 8-10 years were the massive buildup of infrastructure and ghost cities in China, which led to a boon in mining stocks during this time. This scenario is unlikely to be fully repeated but stranger things have happened, such as Coivd19.
After the great recession, AA then went on two runs up to $40 in 2010 and 2014, and one more to $60 in 2018, with cyclical lows in the $16-$20 range in between those bull runs. Even 2020 started off with AA floating around $20 before the Covid19 event collapsed global demand for nearly everything.
Unlike the systemic problems of 2008-09, the economy was not suffering from severe structural issues in 2020, but rather an emergency forced pandemic response that shuttered global market demand temporarily. I do not feel that this will be a long-term event and that construction and production demand for mining products such as aluminum will rebound significantly before the end of 2020.
In making stock picking decisions under such circumstances, I look at short/med/long-term charts to determine what the trend was before the events of 2020. If you click on the 1Y, 5Y, and All time charts, it seems pretty certain that we can expect a rebound to at least 50% of the former high of $62 in April 2018, which puts my price target at $31. At 50% of the 2020 high, that would still be around $10, marking a 100% gain from the 2020 lows. Should we recoup the 2020 high of $20 before year-end, that would establish a 300% gain from bottom to top.
I personally loaded up on AA at $8 on May 5 after watching it gain about 55% in price, thereby confirming a rebound in my mind. After a short drop down to the $6.34 range on May 14 and a further jump to $9, I doubled my position on May 27 to gain a new average cost base of only $8.40, a price not revisited since December 1986! At the time of writing, AA is sitting at $12.59 on June 9, for an ROI of 49.88%.
Based on the foregoing analysis, and the perpetual and cyclical need for mining products in the world, I fully expect that AA will eventually return 3-6 times my money, without even counting dividends, which will surely be reinstated over time as cash flow begins to return.
This stock, in my opinion, is an EXTREME BUY and HOLD until at least the $30 mark, with plenty of uncertainty along the way based on the fickleness of the markets, stimulus from the FED, and the length of lock-downs which could extend the recovery. Beyond that, you could consider profit-taking or beginning to trade in and out of the stock with the cyclical nature of mining issues. Until then, enjoy the ride and make AA an out-sized part of your portfolio. Currently, it accounts for 7.96% of my RRSP account which is 3 times my normal allocation of one stock. The best part is that the capital gains will be 100% tax-free within my RRSP when I finally do liquidate it a few years from now!
Technical Analysis, Recommendations, Financials, and Interactive Charts.
Below you will find the current live data from TradingView.com to help you view some of the data I look at when choosing the right stocks for my own portfolio. All stocks in this course are one that I currently own or have owned since starting this platform. If you just follow what I am doing here, you can achieve similar results.
The chart below is adjustable in many ways. Feel free to experiment. One layout change that is not apparent is the vertical border between the graph and the chart on the right side margin. Hover over the grey vertical bar between the camera lens and the word Details in the top margin and you will see a left-right arrow ↔ appear. This handle allows you to adjust the width of the margin so that all the details of the right sidebar appear. Simply hover over the grey vertical bar until the handle appears, then hold down the left mouse button, and drag the bar to the desired position.
To expand the entire chart into a pop-out window, click on the box with the upward right pointing arrow (see left of the camera icon) and the chart will open in a new adjustable, full view window.
Hover over the chart and scroll your mouse wheel to zoom in or out on the chart details. Or, select the desired viewable time period from the bottom margin to zoom to the desired number of days, months, or years.
OPEN A QUESTRADE ACCOUNT
If you haven't yet opened a trading account on Questrade, please do that now by returning to the lecture titled Setting up a Questrade Account (CAN).
PORTFOLIO MANAGEMENT SERVICES
Personal coaching and account management services are available from www.TheWealthCoaches.com where I will help you to pick the right stocks for your portfolio, set up your alerts and price targets, set auto-buy and sell stop limits, and even adjust those numbers for you under a Limited Power of Attorney Administrative Trust Agreement. Flat fee and percentage management fee structures are negotiable based on your portfolio size and the level of interaction required. Why accept mediocre results from your mutual fund portfolio in a low rate of return environment? Through personal coaching and regular mentorship, as well as some hands-on administrative and account management help, I can help you to grow your portfolio substantially as I have been doing for myself. Once you learn the skills, you can become self-empowered to trust your own skills, powers of observation, and basic instincts to make these decisions for yourself. Or, if you are the hands-off type, you can entrust me to handle the small details for you for a small fee.
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