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Recent Winners: Chinese Commodity Stock Delivers
Gains of +168% |
Published:
July 2,
2007
As
editor of StreetAuthority's premium Half-Priced Stocks
newsletter, I always have my eyes open for sharply undervalued
stocks that might make good additions to one of our model
portfolios. The most promising of these candidates are placed in
our "Watch List," where we actively track their progress -- and
alert readers if we think the time is right to make an
investment.
Such was the case in October 2006, when we first profiled
Aluminum Corp. of China (NYSE: ACH, $42.70), otherwise known
as Chalco. Leading up to that issue, we had watched the stock
tumble 50% in a matter of months. Yet, the firm's underlying
cash flows were stout, and its dividend had soared more than
twenty-fold in recent years. That unique combination resulted in
a rich payout of nearly 8% -- making ACH an ideal pick for that
month's "Feature Article," which focused on undervalued stocks
with high yields.
As the leading aluminum producer in China (the world's
second-most rabid aluminum consumer), Chalco benefits from cheap
labor, considerable scale advantages, and its cozy ties to the
Chinese government. We pointed out all of these factors at the
time, adding that "those willing to shoulder a higher degree of
volatility should eventually see impressive returns."
So when we checked back in on the company in mid-February, it
didn't surprise us to report that the shares had already
rocketed +70%, climbing from a split-adjusted price of $15.93 to
a then current price of $27.00. This rally was (and still is)
partially attributable to the rapid industrialization of
fast-growing countries like China and India, which has fueled
robust demand for raw materials and pushed prices for base
metals like copper and aluminum to multi-year highs. And Chalco
is well-positioned to meet that growing demand, having closed
several key acquisitions and recently purchasing three new
smelters to boost production capacity.
None of this has escaped Wall Street's attention, and one
prominent brokerage has doubled its price target on the stock.
And since our February update, ACH has jumped another +60% to
reach $42.70 per share -- capping a remarkable +168% run-up since
our initial recommendation nine months ago.
In our July issue of Half-Priced Stocks, we will
zoom in on another foreign company with similar potential --
this one a top global steelmaker. The firm enjoys a
monopoly-like hold over its market, recently posted a +40% jump
in operating profits, and has attracted the attention of none
other than Warren Buffett. Yet, for all its credentials, the
company is still trading at a wide double-digit discount to its
fair value.
To learn more about Half-Priced Stocks, and to read more
about this undervalued global leader, please
visit this link.
Good investing!
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Nathan Slaughter
Editor
Half-Priced Stocks, The ETF Authority
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