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Throwing Caution To The Wind
By Ian Cooper
Do yourself a favor. Always do due diligence when it comes to rumors, which, in today’s marketplace, are a dime a dozen. It’s especially imperative that you do due diligence on rumors that just happen to percolate during options expiration week. Take the Alcoa buyout rumor, for example.
The Times of London reported that BHP Billiton and Rio Tinot are working on bids that could value Alcoa at more than $40 billion. According to the report, while both companies are discussing proposals, neither has discussed the buy-out possibility with Alcoa’s board. That news alone should send up the warning signs of impending doom to rumor.
Dig a bit further to disprove the buyout claim’s validity, and you’ll find a Reuters report that BHP is not currently working on a bid. In fact, Reuters (as referred to by USAToday.com) says, “Alcoa’s downstream business, such as consumer products, including packaging, are of no interest to BHP.” Plus, according to Bradford Research / Soleil (as referred to by USAToday.com), “’Both BHP and Rio Tinto have shown no interest in downstream aluminum processing. Their interest has been primarily on the primary (metal) side and in fact both of them are significant players on the primary side…’”
Don’t rush to buy on any rumor. Always do your due diligence.
Take care,
Ian L. Cooper, Editor, Early Alert Trader