One of Diligent Investor’s best-performing recommendations is in a league of its own today!

Aluminum Corp of China (ACH:NYSE), which Diligent Investor
subscribers have been holding since April of this year, topped the list of biggest percentage gainers on the New York Stock Exchange yesterday, up as high as 29.12% at its highest trading price.

Diligent Investor subscribers are up 117% on their holding, almost twice as much as what we sold half of the position for this past June.

For a position we’ve held for a little more than four months, that’s amazing!

ACH is also known as Chalco, and is a major alumina and refiner and smelter in the People’s Republic of China. The company also engages in bauxite mining, which is refined and turned into alumina, and then aluminum.

The news that pushed ACH up so drastically yesterday were strong fundamentals going forward concerning the copper market, as well as speculation that Aluminum Corp of China would be an investor favorite once the Hong Kong exchange is opened up to individual mainland investors for buying and selling equities, which will occur on Wednesday.

According to Philip Securities in Hong Kong, Chinese investors are poised to continue to pump up the Hong Kong stock exchange and the stocks therein. A-shares of Chinese stocks on the Shanghai exchange are denominated in yuan trade at P/E multiple ranges between 62 and 70, while the H-shares, available to individual investors Wednesday on the Hong Kong index, trade only 19 or 20 times the companies’ earnings.

ACH, among many other companies, will be traded through a pilot test, where investors can buy shares directly through the Bank of China without pertaining to the foreign investing limit of $50,000 per year.

Copper demand also spurred the movement on ACH. According to recent data, China imported 103,000 tons of copper in July alone, a gain of 65% compared to the same period a year before.

You may be wondering why ACH would be up on copper demand if they deal with aluminum. But back in mid-June of this year, Peru Copper Inc. (CUP:NYSE) agreed to be bought out by Aluminum Corp of China for $6.22 per share in cash, or $792 million aggregate.

CUP is a Vancouver-based copper miner that has a deal to develop copper deposits in Peru’s Toromocho project, about 140 kilometers east of the city of Lima.

Aluminum Corp of China’s new interest in copper, as well as expectations for aluminum demand in the future -- Chalco says aluminum demand will increase 33% this year alone in the mainland -- offers this company up as a great undervalued investment for up-and-coming Chinese investors.

ACH has jumped up a drastic $12 per share on good Chinese market news and forecasts for copper and aluminum commodity. Technically, it’s slightly overvalued on RSI but Money Flow has a bit more to go. Most likely, ACH will trade flat for the next few days, and then drop to fill in its gap.

If you’re at all interested in an investment, it’d be best to buy between $50 and $60 per share on its next dip.

As for the current American market situation, let me turn it over to Red Zone’s very own Christian “The Hammer” DeHaemer…

Ann

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Buy, Buy, Buy…

Dear American Capitalists,

It’s not bragging if you’re right. On June 22, 2007 I released an article entitled, “Sell at the Top and Look to Buy in Late August” for my Red Zone subscribers

If you took my advice and freed up some cash, you are looking pretty good right now as the S&P 500 fell 163 points from its top. I think we are at the bottom or as near as you can get for government work.

The simplest and most profitable investment philosophy is to buy fear and sell greed. There’s a lot of fear out there right now. A Google news search for “recession” returns 9,857 hits compared to 4,270 hits for “bull market.”

The contrarian in me says that it’s time to go long. The current subprime fear induced sell-off is a clear buy signal.

Abe Froeman, The Sausage King of Chicago…

In fact my favorite economist and funnyman, Ben Stein, tells us we have nothing to worry about: “Subprime is a mess. But it’s a small mess. Subprime mortgages account for roughly 20 percent of mortgages even in the most heavily exposed states. About 20 percent of them are delinquent in some way. That's 4 percent of mortgages.

“Of these, maybe half, or 2 percent, will go into foreclosure. There will be roughly 50 percent recovery on sale of these. This is a loss of 1 percent in the mortgage market -- a sum the lenders have already made many times over because of the hefty fees on those deals. In the context of the size of the U.S. financial sector, it’s nothing.”

Thanks, Ben. In fact we’ve seen these corrections before…

If you look at the last bull market of the past 10 years, corrections of 5% or more happened on five separate occasions (plus the big drop of 2000). However, this is the first sell-off of the new bull market, and it’s just what we need to set up a nice bull run into the winter of 2008.

P/E Ratios Lowest Since 1990

The P/E ratios on the S&P 500 are the lowest they’ve been in more than a decade at 16.5. And yet the earnings of the S&P 500 are growing at double-digit rates. Times are good and U.S. equities are undervalued.

I’m a seller when the P/E ratio is higher than it was during the last bull market. In this case that would be around 38.

That means the current value on stocks would have to increase by 126% today, without further growth, without profits going up… I can’t stress it enough: The S&P 500 is showing an amazing value right now.

The uptrend from the bottom of 2003 is still intact. Its time to buy, buy, buy!

Kind regards,

Chris DeHaemer
The Red Zone

 

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