Alcoa stock up on upgrade, takeover speculation
Alcoa Inc rebounded on the stock market on Tuesday, a day after tumbling 14 percent and a week before it reports fourth-quarter results, and analysts said an upgrade by Deutsche Bank and a report suggesting Alcoa might be a takeover target of mining group BHP Billiton contributed to the stock boost.
Even though aluminum prices fell on Tuesday, Alcoa shares were 83 cents or 12.4 percent higher, at $7.52 in afternoon trading on the New York Stock Exchange.
Alcoa has been one of those commodity stocks that has been beaten up, said William Lefkowitz, options strategist at brokerage firm vFinance Investments in New York.
However, investors who believe that the worldwide economies are going to start to turn around and are beginning to show signs of light at the end of the tunnel have begun buying shares of Alcoa.
He also said next week's Alcoa results may be better than a lot of the gloomier estimates.
Frederic Ruffy, an options strategist at WhatsTrading.com, said Alcoa's rise was probably a technical bounce after Monday's sell-off, which he called an overreaction.
He also said Alcoa stock might be getting a lift from end-of-quarter position squaring and window-dressing by institutional holders.
In a research note, Deutsche Bank raised the aluminum producer's stock rating to hold from sell, saying it is likely that refinancing fears have been pushed into 2010 after about $2 billion of asset sales and equity placements in March.
Desjardins Securities, meanwhile forecast that base metal equities will move higher this year.
In another development, Charlie Aitken, director of Southern Cross Equities, was quoted in the Wall Street Journal as suggesting Alcoa would be a good takeover target for global miner BHP because Alcoa's assets were cheap.
Alcoa fits in all the BHP boxes in my view about tier one assets as well as leading global market shares, said Aitken. I find it highly interesting that there has been a huge volume spike in Alcoa shares and BHP has raised fresh debt capital that is almost identical in scale to Alcoa's debt position.
But Charles Bradford, an analyst in New York with Bradford Research, said a BHP move for Alcoa would not make sense, since there would be antitrust issues dating back nearly a decade to when Alcoa sold assets to BHP when it acquired Reynolds Metal.
Bradford also noted that metals stocks were down on Monday because of general unease at the situation at General Motors Corp, a big buyer of steel and aluminum.
People may be feeling better today, he said. On Monday, the Obama administration gave GM 60 days to reach deeper concessions with bondholders and the United Auto Workers union and said it would finance a court-supervised bankruptcy if the process failed to deliver deep enough savings.
(Additional reporting by Doris Frankel in Chicago)
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