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Joe Terranova: China Demand Makes Alcoa a Buy Under $10

”China's rising demand for aluminum will mostly offset declines in Europe and other regions."

According to top trader Joe Terranova that was one of the most important things Alcoa said when they released earnings on Tuesday - and a lot of the market missed it.

Instead the market was focussed on all the negatives, especially the fact that aluminum prices fell almost 20 percent in the third quarter.  “The question becomes do you think aluminum prices can rebound in the fourth quarter, If you do, then I’d take a look at Alcoa under $10,” he says.

Tim Seymour agrees. “If the stock slides 5%, I’m also a buyer.”

Those were two of our traders' knee jerk reactions to Alcoa results which showed third-quarter profit jumped from a year ago, but earnings and revenue slipped from the second quarter as economic growth slowed from the first half of this year.

Considering Alcoa largely missed - it's not surprising that Guy Adami was skeptical. He reminded the desk that Street expectations came down a lot during the quarter. "But despite the revised estimates they still couldn’t meet expectations. I don’t think that augers well.”

Looking at the numbers you can understand the divergence of opinion. Net earnings were $172 million, or 15 cents per share, compared with $61 million, or 6 cents per share, a year earlier.

Income from continuing operations was also 15 cents per share, but down from 28 cents per share in the second quarter.

Revenue rose 21 percent to $6.4 billion from a year earlier, but was 3 percent lower than the second quarter of this year.

Will the Markets Break the Range?

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Trader disclosure: On October 12, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Seymour owns BAC; Seymour owns GLD; Seymour owns POT; Seymour owns AKS; Adami Owns (AGU); Adami Owns (C); Adami Owns (GS); Adami Owns (INTC); Adami Owns (MSFT); Adami Owns (NUE); Adami Owns (BTU); Terranova is long VRTS; Terranova is long LQD; Terranova is long MUB; Terranova is long FCX; Terranova is long TBT; Terranova is long OXY; Terranova is long HOS; Terranova is long F; Terranova is long LULU; Terranova is long OIH; Terranova is long CAT; Terranova is long AXP; Terranova is long EMC; Terranova is long WFC; Terranova is long AAPL; Terranova is long IBM; Terranova is long Silver December $40 puts; Finerman owns AAPL; Finerman owns BAC; Finerman owns GOOG; Finerman owns JPM; Finerman owns ORCL; Finerman’s firm owns AAPL; Finerman’s firm owns JPM LEAPS & PUTS; Najarian has long call spreads APPL; Najarian has long call spreads MOS; Najarian is long CBOE; Najarian is long CME; Najarian is long SIGX

For Jeff Saut
Saut owns HCN
Saut owns LIN
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Evercore Partners seek investment banking business from Sprint (S) and expect to receive or intend to seek compensation for investment banking services from this subject company within the next three months.

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