Much has been said about how copper, nickel and lithium demand will soar as electric vehicle (EV) sales grow. Much less has been said about how aluminium consumption is set to boom however. According to Bloomberg demand for the lightweight metal will jump 14 times between 2019 and 2030. That compares with the 10-fold increase copper is predicted to increase.
I think this makes Alcoa Corporation (NYSE: AA) a brilliant buy for the next 10 years. This US stock is one of the 10 biggest aluminium producers on the planet. Alcoa also set up a joint venture to enter the high-purity alumina market to meet increasing demand for sustainable products too. Applications here include the manufacture of lithium-ion batteries for EVs.
Alcoa may not have to wait long to receive a big profits bump either. Aluminium prices have just hit their highest since 2008 due to coronavirus-related production stoppages in China. Analysts are expecting material shortages to worsen considerably on the back of these stoppages too.
ING Bank for one now expects an aluminium deficit of 1.7m tonnes in 2022, up 200,000 tonnes from predictions of just a few months ago. The shortfall could get much worse too as Covid-19 problems worsen in China, the world’s number one aluminium producer.
Today, Alcoa trades on a forward price-to-earnings (P/E) ratio of 9.4 times. This sits below the well-regarded value benchmark of 10 times. I think the company’s a top buy even though demand could slump if China’s economy sharply cools.
Another of the best cheap stocks to buy right now!
Residential Secure Income (LSE: RESI) is a stock that’s closer to home that I’m also considering buying. I like this particular UK share because it offers plenty of all-round value right now. The commercial landlord trades on a forward price-to-earnings growth (PEG) multiple of 0.8. This is below the benchmark of 1 that suggests a stock could be undervalued.
Meanwhile, Residential Secure Income offers big dividend yields, thanks to its status as a real estate investment trust (REIT). This classification means at least 90% of the company’s annual profits must be paid out in the form of dividends. And it means this property stock’s yield sits at a big 4.8% today.
Profits are leaping at Residential Secure Income because the UK has a huge shortage of rental properties. This is, in turn, pushing private rents through the roof. In fact, the average rent has just reached its highest for 13 years and looks set to keep growing.
It will take years for the country’s rental homes shortage to be properly addressed, meaning tenant costs should continue rising for some time. But this is not the only reason I like Residential Secure Income today. I also reckon its exposure to the shared ownership and retirement housing sectors should pay off handsomely.
I’d buy this cheap UK share even though rising interest rates could damage demand for its properties from homebuyers.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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