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Thursday December 28, 2006
Skousen sees Aluminum Shine in China Boom
Aluminum Corp. of China (ACH) is the favorite conservative investment idea for 2007 from Dr. Mark Skousen, 25-year editor of the industry-leading Forecasts & Strategies, A noted author, Columbia Graduate School professor, and former CIA economist, Mark is also the host of the FreedomFest - an annual think tank covering topics from philosophy to finance, and featuring speakers such as economist Art Laffer, Whole Foods' CEO Charles Mackey, and Stephen Moore. 
"Aluminum Corp. of China ADS (ACH NYSE), commonly known as Chalco, is the world's second-largest aluminum maker. Lighter than steel and resistant to corrosion, and high in electrical conductivity, alumina is widely used in applications such as construction, power, packaging, and autos. "However, commodity prices have cooled off lately and alumina has been no exception. Prices have fallen during the past year -- and that retreat has begun to affect the company's profitability. But Chalco is mitigating the negative impact of declining prices by snapping up smelters in China to expand its aluminum output. "The company has also just announced a restructuring of its assets after buying two Chinese aluminum firms. Chalco announced that it plans to offer a stock swap involving Shandong Aluminium Industry Co. and Lanzhou Aluminium Co. "Most analysts I've talked to think that this move is positive. Chalco's CFO told investors that the company would hold a shareholder meeting around January 15 to vote on the share swap. "Meanwhile, Chalco not only sells for eight times prospective earnings, but the stock also sells at just 35% of sales. That's awfully cheap, especially when you consider that Chalco has operating margins of 31% and management is earning a healthy 29% return on equity. "True, the company's fortunes are closely tied to China's booming demand for aluminum products. But there's no good reason to think that demand -- or China's economy -- will cool off any time soon. Chalco trades at a 30% discount to Alcoa. I believe the stock will significantly rise in value." Meet Mark at next summer's www.freedomfest.com.
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