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Foiled Again?

Investments needn’t be as complicated as collateralized debt obligations to make money. Besides, you probably don’t want to own anything that has even the biggest Wall Street CEOs scratching their heads. That’s why Cramer keeps it simple. Know what you own, he often says.

Well, his steel-aluminum thesis couldn’t be easier to understand: As steel prices rise, companies will switch to aluminum to save money. So buy Alcoa, 11% owner of the world aluminum market, to profit from the trend.

That’s it. Alcoa’s just a simple substitution story. A good portion of the 25 billion beverage cans in Europe is made of steel, with the remaining made of aluminum. Cramer’s expecting a large conversion to the cheaper, lighter alternative, at least until steel prices come down.

Sure, there are plenty of other reasons to like aluminum – and Alcoa – here. Auto and aerospace firms are making the switch because the lighter weight saves energy. China’s aluminum supplies are thinning, so demand should climb as a result. There’s even the possibility of a takeover. BHP Billiton’s bid for Rio Tinto fell through, so why not go for Alcoa, which owns 12% of Rio? A deal could push AA’s stock up $27, Cramer said, to $64 from $37.

Other facts of note: Analysts often overlook Alcoa’s fastener business, which plans to supply more than 1 million fasteners to each Boeing 787 Dreamliner. Then there’s the earning beat last quarter, a buyback worth 16% of shares outstanding and an inexpensive multiple.

Scratching your head about Alcoa? We didn’t think so.

Questions for Cramer? madmoney@cnbc.com

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