The Stock Market Jungle

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1. It won’t be until later in 2005 before the salad days of 2000 return to Alcoa. AA 2000 earnings were $1.81, but have fallen off since then, being $1.45 (2001), $0.92 (2002), $1.20 (2003) and est. $1.56 (2004). Where’s the growth? In fact the 3-year earnings growth rate is negative.
2. Earnings released last week were under estimates for the third straight time. It doesn’t help earnings when raw material costs escalate and a major plant is on strike. Of course, the workers are concerned when they read about management’s multi-billion dollar cost reduction programs.
3. The PE (ttm) of 19.9 is well above my fair value calculation of 18 (and dropping when interest rates rise).
4. Current price is below 50-day MA ($32.02) and well below its 200-day MA ($32.99), and might soon test its 2004 low of $28.51 on May 10.
5. All RSI, MACD and STO technical indicators in short-term hourly and daily data series are weak and will likely carry over to Weekly data charts, particularly if VIX and VXN volatility indicators continue to move up.
6. Guru analysis by Lynch is at 0% and Motley Fool is 21%, so this is no growth stock as we know. Value investors have to decide whether investors have cast aside enough stock after three consecutive earnings disappointments this year or whether there is more downside to go. I think we’ll see another ten percent.