Get exposed to global economic growth with aluminum

Emerging market investors should always keep an eye on the direction of securities in the aluminum sector. Equities such as Alcoa ( AA, quote ) and exchange-traded funds such as iPath DJ-UBS Aluminum TR Sub-Idx ETN ( JJU , quote ) may be well off their year highs - but they're on the rebound.

Like the exchange-traded note for copper, iPath DJ-UBS Copper TR Sub-Idx ( JJC , quote ), Alcoa and iPath DJ-UBS Aluminum TR Sub-Idx ETN offer insight into the strength of the global economy.

While no longer the world's biggest aluminum producer, Alcoa is a play on worldwide demand. As detailed in previous Emerging Money articles , the company has operations in many emerging market nations.

Unlike gold ( GLD , quote ), aluminum and copper are critical industrial materials. That is why the trajectory of the JJC and the JJU on the chart below demonstrates such a strong correlation between the two commodities.

Recent reports of slower growth in emerging market nations such as China, India and Brazil have sent both aluminum and copper to the downside -- and declining growth for the euro zone is not helping.

Thanks to the most recent downward move, Alcoa has a high short float of 7.22%. A short float of 5% is considered to be troubling for a company.

Alcoa certainly looks more promising in recent trading, however, as it is up 8.87% for the last week. There is much to like on the balance sheet and income statement: the forward-price-to-earnings ratio is 10.18. Earnings-per-share growth this year is 112.94%. Over the next year, earnings-per-share growth is estimated to be 81.13%. The price-to-sales ratio is 0.44. The price-to-book ratio is 0.79.

But while Alcoa is currently trading under $10.30 a share, the mean analyst target price over the next year is $11.58.

Institutions own almost 60% of AA shares, which is bullish. When growth returns to the global economy, the share price of Alcoa will rise.

For the last week, the iPath DJ-UBS Aluminum TR Sub-Idx has increased by 1.70%.

The iPath DJ-UBS Copper TR Sub-Idx has appreciated 4.35% over the same period.