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Can Industrials Rescue the Market?

David Becker
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Industrials have seen better than expected earnings and could be the catalysts that rescue the markets from the current downdraft. Alcoa Inc. (NYSE:AA) the world’s leading producer and manager of primary aluminum, fabricated aluminum and alumina facilities, and is active in all major aspects of the industry.

Alcoa moved higher Monday after JPMorgan raised its rating citing tightening global aluminum markets and higher regional aluminum premiums that would provide support to its earnings. JPMorgan lifted Alcoa to “Overweight” from “Neutral” and increased its price target on the shares to $15 from $9 on expectations of tighter global supplies of aluminum following capacity reductions. The firm also nearly doubled the company’s earnings estimate for 2014 to 78 cents per share from 40 cents per share.

The 52-week range of AA is $ 7.63 – $12.32, and the stock hit a fresh 52-week high in January. Earnings declined 33% in the latest quarter and the 3-year growth rate of earnings a negative 33%. Sales were down 5% quarter over quarter and the three-year growth rate of sales was up 1%. The company has a dividend yield of 1% and a profit margin of 1.8%.

Recent insider buying makes the stock look attractive. Ratan Tata a director purchased 2000 shares on January 15, 2014 for a total value of 20K. Patricia Russo a director and officer of the company purchased 3K shares for a total value of 30K on January 2, 2014. Arthur Collins purchased 5700 shares for a total value of 60K on January 2, 2014. There was only one insider sale in January and it was offset with a purchase.

The technical shows a stock with positive momentum. The trend is upward as the stock formed a bullish flag over the past few trading sessions. Momentum is strong with the MACD (moving average convergence divergence index) printing in positive territory.

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