| The typical recession advice says not to buy steel | | | | rising metal spreads "are likely to result in |
| companies in a bear market. But this group of | | | | significant margin expansion" for NUE, and I agree. |
| companies has been among the strongest | | | | Also trading near their 52-week highs, keep Nucor |
| performers year to date! Explosive steel demand | | | | on a short leash. |
| has entirely outdone global supply. Despite the U.S. | | | | Steel Dynamics Inc. (NYSE: STLD) |
| recession lag, global steel demand is expected to | | | | STLD is a great steel company, but i have fears |
| rise 5% a year. Whether you turn to the Middle | | | | that their fundamentals may have already juiced |
| East, India or China, buildings are going up daily, | | | | up the stock price too much. I feel that they |
| everywhere you look. | | | | have taken off too fast out of the gates, and |
| The most interesting market in my view is China, | | | | you need to wait a while before jumping back on |
| where they are anticipating 2008 crude steel | | | | board. |
| demand to rise 11% versus a supply increase of | | | | That being said, Steal Dynamics is a stellar |
| just 6.3% (China Daily). Fast Money analyst Guy | | | | company that has eeked out profit from every |
| Adami says "the steel story is real," and I don't | | | | corner of the market. Scrap prices have |
| blame him. Let's take a look at four of the best | | | | increased gross margins, "flat rolled" product |
| steel stocks money can buy! | | | | pricing has outpaced input costs and even |
| U.S. Steel Corp. (NYSE: X) | | | | resource operations are outpacing profit |
| I recommended U.S. Steel at $96.29 a share back | | | | expectations as demand rises. |
| on January 21, 2008. Today, they are trading at | | | | I don't buy the "concerns" many analysts have |
| $140.70. I don't mean to brag, but that's a | | | | about STLD. Rather, I think that Steel Dynamics |
| 46.121% return on your investment. Just a | | | | is one of the best in its class... but it is just not |
| friendly reminder to trust the Net Fool! | | | | attractive enough to push more money into. Can't |
| Business as usual down at U.S. Steel is stronger | | | | get too greedy, they have nearly doubled since |
| than expected, and they are at a 52-week high... | | | | mid-January. This is definitely a stock to track |
| but I see them going higher! Why is X so special? | | | | though, and if something were to trigger a selling |
| Most steel producers need to offset higher ore | | | | frenzy, I wouldn't second guess buying on the |
| costs with higher prices, but U.S. Steel has a | | | | way down. |
| unique integrated business model that includes | | | | Reliance Steel & Aluminum Co. (NYSE: RS) |
| self-sourced ore operations. Less exposure to the | | | | Reliance is in a pretty favorable environment for |
| global iron ore market means potential to | | | | growth right now, and I think they could definitely |
| outperform by taking advantage of price | | | | outperform in the short and long term. Things like |
| increases without taking a hit on input costs like | | | | better carbon steel pricing environments, strength |
| most other producers. | | | | in end markets (energy, oil & gas, |
| Wait for a good buying point on X, and you might | | | | aerospace), strong non-residential construction |
| be able to work in some extra gains off the top. I | | | | numbers and minimal discretionary exposure has |
| recommend waiting for something around $130, | | | | Reliance Steel & Aluminum jumping beyond |
| but who am I to discount their higher highs? I still | | | | expectations. |
| trust steel, and U.S. Steel is still my X-factor for | | | | Historically, Reliance Steel has been able to turn |
| 2008. | | | | out huge revenue growth from smart acquisitions, |
| Nucor Corp. (NYSE: NUE) | | | | I think they continue on this path (just purchased |
| The recent run up in scrap metal prices, primarily | | | | Dynamic Metals on April 2nd). Management has a |
| due to higher than anticipated domestic & | | | | great focus on improving performance where |
| global demand, lower supply and higher-priced | | | | they are market leaders. In a consolidating steel |
| alternatives, has fueled a recent buying frenzy of | | | | market, this is a very important strategy. Trading |
| scrap processors for Nucor. This is not a bad | | | | around $62, I expect them to reach a target |
| thing. Most notably, Nucor acquired Metal Recycling | | | | over $70 in 12 months, but I wouldn't want to |
| Services Inc. and said the deal "provides additional | | | | own them until I can get them closer to $55. |
| growth in the scrap metal sector." NUE makes | | | | Regardless, this is another winner in my eyes. |
| steel from recycled materials. | | | | Bottom Line: Hindsight is always 20-20, and I |
| Why am I talking about this consolidation? I think | | | | wouldn't be shocked if we turn around at the end |
| Nucor is one of the smarter companies, and they | | | | of the year and say "gosh, why didn't I buy at |
| are making all the right moves to vertically | | | | the 52-week highs?" I am too scared off by this |
| integrate their business. Estimates from most | | | | run up to buy right now, but I am asserting that |
| major firms are on the up-and-up because a lot | | | | this industry has catalysts and all of these stocks |
| of these deals are adding insane value and | | | | are on my watch lists... just waiting to get my |
| security to Nucor's business. JP Morgan feels that | | | | value. |