The council says no typical recession to buy steel companies in a bear market. However, this group of companies has been one of the strongest performers year to date! The explosive demand for steel has completely overcome the global supply. Despite the delay of U.S. recession, global steel demand is expected to increase 5% annually. Whether you turn to the Middle East, India and China, the buildings are going up every day, everywhere you look.
The most interesting market in my opinion is China, where 2008 are anticipating demand for crude steel up by 11% compared to an increase in the supply of only 6.3% (China Daily). Money Guy Adami says analyst, "The story of steel is real" and I do not blame him. Let's take a look at four of the best steel money can buy shares!
U. S. Steel Corp. (NYSE: X)
I recommended U.S. steel $ 96.29 per share again on January 21, 2008. Today they are trading at $ 140.70. I do not mean to brag, but that's a 46.121% return on your investment. Just a reminder for the confidence of Red Crazy!
Business as usual down in the U.S. Steel is stronger than expected, and are at a maximum of 52 weeks ... but I see it going higher! Why is X so special? Most steel producers needed to offset the higher costs of ore, with higher prices, but the U.S. Steel has a unique business model that includes integrated self-ore operations of origin. Less exposure to the world market of iron ore potential means to overcome by taking advantage of price increases without impacting on the cost of inputs like most other producers.
Wait for a good buy at point X, and you might be able to work in some additional revenue from the top. I recommend waiting for something around $ 130, but who am I to discount their higher highs? Yet confident of steel, and the U.S. still my X-factor for the year 2008.
Nucor Corp. (NYSE: NUE)
The recent rise in scrap prices, mainly due to increased domestic and global demand forecast, lower supply and higher-priced alternatives, has caused a buying frenzy of the last processors of scrap Nucor. This is not a bad thing. In particular, Nucor acquired Metal Recycling Services Inc. and said the deal "provides additional growth in the sector of junk." NUE produces steel from recycled materials.
Why am I talking about this consolidation? I believe Nucor is one of the most intelligent, and are doing all the right moves to vertically integrate their business. Estimates of most large companies are up-and-up, because many of these deals are adding value and safety madness businesses of Nucor. JP Morgan estimates that rising metal spreads "is likely to result in significant margin expansion" for NUE, and I agree. Also trading near its 52-week highs, Nucor keep at bay.
Steel Dynamics Inc. (NYSE: STLD)
STLD is a large steel company, but I have fears that its foundations may have already squeezed the share price too. I think they've removed too fast from the gates, and wait a while before returning on board.
That said, stealing Stellar Dynamics is a company that has eeked benefit from all corners of the market. Scrap prices have increased gross margins, "rolled" price of the products exceeded the cost of inputs and even resource operations are exceeding earnings expectations as demand increases.
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