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Forget Gold;Buy Aluminium!

Almost half the world population tracks Gold price which has been hovering around $800 to $1000 during this economic crisis and has done very well as a protection against downside risk. During same duration, Aluminium has gone down from over $3000 per tonne to $1400 for 60% loss. This is expected since nobody buys Aluminium has hedge against protection and has co-relation with overall economic activity. That's where my investing idea comes in.

Now that economy is just coming out of severe downturn, there are small signs of recession ending and growth resuming. With growth would come factories starting and car demand picking up. Since Aluminium is being used in many industries, it is natural that demand for it would pick up and along with that price. I am expecting it to go above $2000 in 12-18 months. How does one invest in Aluminium. 

Here are my suggestions:

  • Alcoa (AA) - one of the biggest Aluminium player. It is good buy at $10-$10.50
  • Sterlite (SLT) -  Major Aluminium and copper player in India $13 to $14
  • Aluminium Corporation of China (ACH) - major player in China at $22-$25
  • Century Aluminium (CENX) - This is my stock of week recommendation at buy price of $6 with target price of $9 in 12 months. This is one of the speciality aluminium player. It's stock price collapsed due to liquidity concerns and is still down nearly 85% from its peak. When metal prices recover, it should benefit and even though it will not reach its all time high ever, it could give significant returns. Similar to my earlier recommendations, it is "survival" play and investors willing to bet on "survival" premise can gain significantly
So gold is for jewellery - it looks good as jewellery (but does not beautify portfolio)
Go for some real metal and add some muscle to your portfolio !

Good luck and have a good week

/Shyam

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