Guest Worlds Within the Margin Posted April 4, 2013 Share Posted April 4, 2013 Any thoughts about this stock? I couldn't find a thread about here. I think it has pretty good long term prospects (also trades under book currently). Alcoa seems to primarily trade in relation to the economy, China, and aluminum prices. Pretty good management in my opinion as well, trying to stay ruthlessly efficient in a aluminum market fueled by Chinese over production. Though debt may be an issue. Any ideas? Link to comment Share on other sites More sharing options...
JayGatsby Posted October 17, 2015 Share Posted October 17, 2015 Has anyone looked at Alcoa recently? I know there's a lot of interest in aerospace on the boards (RR, etc) which is why I bring it up. They recently announced a split of their metals and value-add business (http://www.wsj.com/articles/alcoa-to-split-into-two-companies-1443437130). I haven't dug in enough yet on the numbers, but the hope would be the sum of the parts is greater than the whole. They've had massive restructuring costs that have been a bit of a black eye for them financially. As far as I can tell they've actually done a massive amount of restructuring (closing / selling facilities, etc). I suspect it is, but wondering if this is worth the time to dig in further. AA is a pretty big name, so there may be some forced selling once they actually split. Link to comment Share on other sites More sharing options...
SnarkyPuppy Posted November 13, 2015 Share Posted November 13, 2015 Baupost (Seth Klarman) just disclosed a new stake in Alcoa as part of the 13F release today http://www.sec.gov/Archives/edgar/data/1061768/000114036115041178/xslForm13F_X01/form13fInfoTable.xml Link to comment Share on other sites More sharing options...
arcube Posted November 13, 2015 Share Posted November 13, 2015 Baupost (Seth Klarman) just disclosed a new stake in Alcoa as part of the 13F release today http://www.sec.gov/Archives/edgar/data/1061768/000114036115041178/xslForm13F_X01/form13fInfoTable.xml If I am reading it correctly, that is BG's largest position? Link to comment Share on other sites More sharing options...
JayGatsby Posted November 13, 2015 Share Posted November 13, 2015 Interesting. So looks like he owns ~4% of the company? Thought he owned more Micron... guess he scaled back or I was just wrong. Arcube, I think colum 4 is their dollar position. Looks like Cheniere is the bigest, then Viasat, and this is #3 I think? I fully allocated to it around $9.50. Wish I'd saved some dry powder, but still happy with the price. What's ineresting is most articles on the company act like the value-add segment doesn't even exist. They discuss the challenges in primary aluminum related to China and how that's a death sentence for AA. Even if you assume that side is worthless as an enterprise there's still value in the assets, including a few hydroelectric plants. There's some good backlog with Ford, Lockheed and others that hasn't hit yet. The technology they have in the F150 has potential to be pretty big, but right now is valued at $0. Actually it's probably valued at a negative amount because they've been spending heavily on R&D. I'm a little weary of their acquisitions because it looks like they paid full price while AA is currently at a discount. I guess time will tell if they're able to realize the synergies they anticipate. Also they'll probably be impacted by the same slowdown in commercial jets that has hit RR. Link to comment Share on other sites More sharing options...
arcube Posted November 13, 2015 Share Posted November 13, 2015 Interesting. So looks like he owns ~4% of the company? Thought he owned more Micron... guess he scaled back or I was just wrong. Arcube, I think colum 4 is their dollar position. Looks like Cheniere is the bigest, then Viasat, and this is #3 I think? I fully allocated to it around $9.50. Wish I'd saved some dry powder, but still happy with the price. What's ineresting is most articles on the company act like the value-add segment doesn't even exist. They discuss the challenges in primary aluminum related to China and how that's a death sentence for AA. Even if you assume that side is worthless as an enterprise there's still value in the assets, including a few hydroelectric plants. There's some good backlog with Ford, Lockheed and others that hasn't hit yet. The technology they have in the F150 has potential to be pretty big, but right now is valued at $0. Actually it's probably valued at a negative amount because they've been spending heavily on R&D. I'm a little weary of their acquisitions because it looks like they paid full price while AA is currently at a discount. I guess time will tell if they're able to realize the synergies they anticipate. Also they'll probably be impacted by the same slowdown in commercial jets that has hit RR. Thanks for the correction Jay. I was just looking at purchases of Q3. Thanks. Wasn't there a plan that AA will spin-off a part of the company that is not highly exposed to the commodity cycle? more value add? Link to comment Share on other sites More sharing options...
JayGatsby Posted November 13, 2015 Share Posted November 13, 2015 Yes, mid-2016 or so it will go effective I think. They're splitting the business into the commodity side (alumina mining, smelting, etc) and the value-add side (rolled al, aerospace/auto/packaging, etc). Link to comment Share on other sites More sharing options...
Guest neiljgsingh Posted November 13, 2015 Share Posted November 13, 2015 Steven Romick of the FPA Crescent Fund (portfolio http://www.dataroma.com/m/holdings.php?m=FPACX via Dataroma) talks about his AA investment at around 8:50: Link to comment Share on other sites More sharing options...
Guest neiljgsingh Posted November 13, 2015 Share Posted November 13, 2015 Also, here's Baupost's latest 13-F: http://www.dataroma.com/m/holdings.php?m=BAUPOST AA now his third largest position, and it looks like he was basically done cashing out on MU as of Sept. 30th. Probably entirely out by now. Link to comment Share on other sites More sharing options...
arcube Posted November 25, 2015 Share Posted November 25, 2015 Just wondering why this thread is not getting any love from the board or specifically ex-PCP owners. Also wondering what a bear case on this one looks like. Any comments to that would be deeply appreciated. Link to comment Share on other sites More sharing options...
topofeaturellc Posted November 25, 2015 Share Posted November 25, 2015 The bear case is that the upstream assets are off the cost curve and owning a non-integrated re-roller of aluminum isn't an exciting business - especially if you need specialized product as feedstock. I'm not saying I agree with or even that I have a view on any of it. But historically you wanted to be integrated. Link to comment Share on other sites More sharing options...
DooDiligence Posted October 9, 2016 Share Posted October 9, 2016 Looks like Klarman hit the exits pretty quick on this one (according to Dataroma.) In the 2015 year end letter he says: "2015 was a year of dodging relentlessly falling knives. Upon deeper inspection, one superficially tempting investment after another turned out to be worse than they officially appeared." He never specifically mentions Alcoa but... I've never been able to get comfortable with the complexity of the financial statements & the fact that IMHO Mr. Kleinfeld has been excessively compensated wayyyyy in advance of performance of the huge acquisitions / restructuring / split up (it strikes me as paying a realtor ginormous fees for years with the possibility that they'll sell your house at a substantial loss.) All this & a business reliant on a commodity price in an industry with serious overcapacity (aerospace aside for now) & an underfunded pension & its overly optimistic assumption / discount rate. I like owning parts of businesses I like so Alcoa went in the too ugly to want anything to do with pile. The only reason I got interested was that my sister bought some Alcoa without talking to me 1st. She paid around $14 a share & when it dropped to $7ish I fixed her up with some Jan 2017 $8 Calls which we traded off when it recovered to $11ish to get her cost down (I realize these Calls did not fit her risk profile despite the fact that she had purchased Alcoa to begin with so I bought them in my account & gave her the profit minus cap gains tax as a surprise.) I had her read up on the aluminum industry (she didn't even know what bauxite was) & then I handed her the 500+ page 10K (you know, the one without all the pretty pictures like in the annual report.) It was like hitting a puppy with a rolled up newspaper (you hate to do it but no more piddling on the carpet...) The good news is that after multiple conversations where I steal a lot of Buffet / Munger quotes; she promises to not buy into anything again without having a "let's sit down & learn about this company 1st" session. Anyone got a different view on Alcoa? Link to comment Share on other sites More sharing options...
Alex.N.B Posted October 9, 2016 Share Posted October 9, 2016 Isn't most of the value in the Specialty Products/Engineering businesses? Seems like the market has focused more on the Aluminum business which you pretty much get for free when buying the business for 10bn (market cap has increased recently). I figure Arconic is worth more than $15bn vs. pre-spin-off market cap of ~ 10-12bn which includes both Arconic + Alcoa.. The dynamics for aerospace parts businesses are good (new engines ramp-up). PCP was acquired for ~12x EBITDA if I recall correctly ... 10x Arconic's ebitda (~2.2bn) minus ~2.5x debt gets you to around 15bn value for Arconic... not a huge discount anymore but this is just a rough analysis.. a few months ago seemed like there could be an opportunity with a decent margin of safety.. Link to comment Share on other sites More sharing options...
ValueMaven Posted October 10, 2016 Share Posted October 10, 2016 Dear Alex.N.B Very well stated!! I own some AA, which I bought in mid-Jan solely based on a relative comp analysis, which you so brilliantly showed above. The debt and cross ownership is complex, and I have a feeling the story is likely played out for the rest of the year. Let's see how things turnout post-spinoff. Sincerely, ValueMaven Link to comment Share on other sites More sharing options...
DooDiligence Posted October 10, 2016 Share Posted October 10, 2016 I've looked at the acquisitions of Firth Rixon, Tital & RTI & do believe that although they've been having troubles integrating Firth, this combination presents opportunities not present in aluminum alone. Can Klaus Kleinfeld whip this into anything like what Mark Donegan has done at PCP? (meh...) The Yahoo finance AA forum has been full of amateurs pumping Alcoa for over a year now. There's a large volume of short positions with a high ratio which could cause the price to (oh my God I sound just like those idiots on Yahoo - gotta stop here...) I'm not sophisticated enough to grind through this one & figure out if it'll be worth anything in a few years. I started twitching at the pension assumptions & exec compensation (I understand K had a nice run at Siemens & that the AA curtailments & acquisitions have been a lot of work for him but seriously - pay before performance results? Maybe I'm just naive...) The alarm bell for me was Klarman hitting the exits so fast (who knows; maybe he traded equity for debt and/or levered in with options...) Also the fact that none of the voices I respect on here have chimed in (I'll pass in favor of the choices in my signature & any others in my long watchlist which I get lucky enough to acquire in the future.) Link to comment Share on other sites More sharing options...
JayGatsby Posted October 11, 2016 Share Posted October 11, 2016 The bear case here is?: 1. Falling LME warehouse levels don't capture shadow inventory (or that AA is wrong and industry is oversupplied) 2. Risk of China slowing impacts aluminum prices 3. Minimill and aerospace are mainly just options at this point 4. Pensions / OPEB add to debt I'm long but want to make sure I'm understanding right. Long thesis is basically that if you use a multiple close to PCP you get close to covering the total value with a lot of embedded options (aluminum price, auto/minimill, aerospace). So far I like the moves KK has done but still TBD if he paid right for Firth Rixson and RTI. Edit: Guess we'll get a glimpse tomorrow morning. Link to comment Share on other sites More sharing options...
CorpRaider Posted October 11, 2016 Share Posted October 11, 2016 Hmmm. Too hard, maybe. Man there is kind of a fair amount of stuff going on/to look at with this, CAG, COTY, MDLZ, WETF, NOMD and some other stuff. I love investing. Link to comment Share on other sites More sharing options...
DooDiligence Posted November 1, 2016 Share Posted November 1, 2016 Split up today... Cramer lobbed a bunch of easy ones at Klause. He asked about the pensions (I guess to show he was hard hitting) but didn't delve into the overly optimistic assumptions or discount. Thoughts? I kept 20 of the Jan 2017 $8 Calls I had bought to get my sister out from underwater on her equity (which luckily worked BTW!) It remains to be seen if I'll make anything on this little slot machine move (the only one of its kind I have right now...) Link to comment Share on other sites More sharing options...
JayGatsby Posted February 10, 2019 Share Posted February 10, 2019 Anyone following Arconic? Shares are way down given management turnover, a messy botched sales process, and tariffs. Trends should be good for aluminum in autos, and they claim to have much larger share on the next generation of aircraft. "before investors start to bet on a turnaround, though, they need better answers to the most basic questions," [Charley] Grant writes. It's a smallish position for me, but going to do some more research. Also, not sure if this should have its own thread now? I guess it is no longer alcoa so it should Link to comment Share on other sites More sharing options...
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