Trimming Alcoa

Alcoa (NYSE: AA) ended 2007 by trimming a host of ancillary operations. It appears to be reaching a fighting trim that could thrust it back into the merger wars - on one side or the other.

Alcoa recently sold its packaging and consumer businesses, as well as its automotive castings business. On the acquisition front, it failed to buy its Canadian aluminum manufacturer rival, Alcan, which took a bigger offer from London-based mining giant Rio Tinto (NYSE: RTP).

With the rapid industrialization of China, India and other developing nations, the metals and mining sector has been growing quickly in importance to those countries, while becoming a hotbed of takeover activity. In addition to the Alcan purchase, copper producers Freeport McMoRan (NYSE: FCX) and Phelps Dodge joined forces earlier this year, and Rio Tinto itself is currently the subject of a slow-moving acquisition effort by Australian mining and energy giant BHP Billiton (NYSE: BHP).

The company's trimming of non-core assets and the application of resulting funds toward core areas could render it more attractive, whether as the hunter or the prey. On that basis alone, to say nothing of its nearly 2 percent dividend yield and its key position in a significant metals market, consider finding a spot for it on your watch list.