Author Topic: AA-Alcoa Inc.  (Read 8921 times)

topofeaturellc

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Re: AA-Alcoa Inc.
« Reply #10 on: November 25, 2015, 03:05:17 PM »
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.


DooDiligence

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Re: AA-Alcoa Inc.
« Reply #11 on: October 08, 2016, 10:23:06 PM »
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?
Healthcare 37.4% - CVS DVA EW NVO // BRK.B - 20.4% // Media & Communication 12.4% - CHTR DIS

Drinkers & Smokers 13.1% - ABEV MO // Auto's & Oil 14.5% - CLB GPC VDE // Tech 2.1% - AAPL

%'s held @ MV 04/5/2019 minus $$$

i trumpet my ignorance

https://twitter.com/tunawish

Alex.N.B

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Re: AA-Alcoa Inc.
« Reply #12 on: October 09, 2016, 03:11:45 PM »
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..

ValueMaven

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Re: AA-Alcoa Inc.
« Reply #13 on: October 10, 2016, 11:00:17 AM »
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

DooDiligence

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Re: AA-Alcoa Inc.
« Reply #14 on: October 10, 2016, 11:41:46 AM »
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.)
Healthcare 37.4% - CVS DVA EW NVO // BRK.B - 20.4% // Media & Communication 12.4% - CHTR DIS

Drinkers & Smokers 13.1% - ABEV MO // Auto's & Oil 14.5% - CLB GPC VDE // Tech 2.1% - AAPL

%'s held @ MV 04/5/2019 minus $$$

i trumpet my ignorance

https://twitter.com/tunawish

JayGatsby

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Re: AA-Alcoa Inc.
« Reply #15 on: October 10, 2016, 09:17:19 PM »
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.

CorpRaider

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Re: AA-Alcoa Inc.
« Reply #16 on: October 11, 2016, 04:51:24 PM »
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.
« Last Edit: October 11, 2016, 04:56:56 PM by CorpRaider »

DooDiligence

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Re: AA-Alcoa Inc.
« Reply #17 on: November 01, 2016, 02:20:02 AM »
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...)
Healthcare 37.4% - CVS DVA EW NVO // BRK.B - 20.4% // Media & Communication 12.4% - CHTR DIS

Drinkers & Smokers 13.1% - ABEV MO // Auto's & Oil 14.5% - CLB GPC VDE // Tech 2.1% - AAPL

%'s held @ MV 04/5/2019 minus $$$

i trumpet my ignorance

https://twitter.com/tunawish

JayGatsby

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Re: AA-Alcoa Inc.
« Reply #18 on: February 10, 2019, 02:49:23 PM »
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