Should You Buy Alumina Ltd Shares After Their Rise Today?

What does Alumina do?

Alumina Ltd [ASX:AWC] is a global bauxite miner and alumina refiner. It also has some exposure to aluminium smelting operations. It conducts this business thorough a joint venture with US listed Alcoa.

Alumina basically mines and refines the raw materials for aluminium, one of the most important commodities in the world.

What’s happening to AWC’s share price?

Today, AWC’s price jumped nearly 10%. The move came on the back of overnight news that China’s leadership is cutting back on steel and aluminium production in an effort to reduce winter smog.

The market took this to mean that lower production on rising demand means rising prices too. Presumably, the market’s bullish reaction to Trump’s ‘spend, spend, spend’ speech helped the share price too.

What now for AWC?

AWC benefits from a rise in commodity prices, ; and aluminium and the associated raw materials have increased strongly in price over the past 12 months.

This bodes well for AWC, as it has some of the best (lowest cost) bauxite mines in the world.

As a commodity raw material producer, AWC is a price taker. So it’s future depends very much on global demand for the metal. The move to make cars lighter (meaning less steel and more aluminium) is a good structural driver for the company.

And the outlook for the global economy has certainly picked up in 2017. The mood is bullish. This bodes well for future earnings.

The charting picture looks good too.

As you can see in the chart below, AWC has rallied strongly in the past six months. The price corrected recently, but today’s rally brings it back to longer- term highs.

Alumina Shares 2017

Source: Bigcharts

The upward trend looks strong. Combined with a bullish outlook for global growth, AWC’s prospects look good.

Never assess a stock’s fundamentals without looking at the chart too. Combining fundamental analysis with charting can yield powerful results.

If you’d like to know more, click here .

Greg Canavan
Editor, Money Morning


Greg Canavan is a Feature Editor at Money Morning and Head of Research at Fat Tail Investment Research.

He likes to promote a seemingly weird investment philosophy based on the old adage that ‘ignorance is bliss’.

That is, investing in the Information Age means you have all the information you need at your fingertips. But how useful is this information? Much of it is noise and serves to confuse, rather than inform, investors.

And, through the process of confirmation bias, you tend to read what you already agree with. As a result, you often only think you know that you know what is going on. But, the fact is, you really don’t know. No one does. The world is far too complex to understand.

When you accept this, your newfound ignorance becomes a formidable investment weapon. That’s because you’re not a slave to your emotions and biases.

Greg puts this philosophy into action as the Editor of Crisis & Opportunity. As the name suggests, Greg sees opportunity in a crisis. To find the opportunities, he uses a process called the ‘Fusion Method’, which combines traditional valuation techniques with charting analysis.

Read correctly, a chart contains all the information you need. It contains no opinions or emotion. Combine that with traditional stock analysis and you have a robust stock-selection strategy.

With Greg’s help, you can implement a long-term wealth-building strategy into your financial planning, be better prepared for the financial challenges ahead, and stop making the basic, costly mistakes that most private investors do every time they buy a stock.

To find out more about Greg’s investing style and his financial worldview, take out a free subscription to Money Morning here.

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