Alcoa Inc.
Thesis
Alcoa's core franchises are quality businesses generating returns in the low to mid teens, despite the overall company being misjudged due to the poor performance of its aluminum segment. The alumina business is particularly strong, benefiting from resilient pricing and demand from China, which is expected to grow at 5-7% annually. The valuation suggests significant upside potential, with a target price of $15.91 representing approximately 60% upside from the current price of $10.01.
Did it work?
The stock price increased by 376.4%, significantly exceeding the target price of $15.91 and the anticipated upside of 60%. This substantial price appreciation aligns with the thesis that Alcoa's core franchises are strong and undervalued, particularly in the alumina business. Given the dramatic return, the thesis has clearly played out successfully.
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