While steel might lack the sizzle of other sectors, it has attracted a wide range of support from some of the very best financial seers: technical expert, Bernie Schaeffer, momentum guru Louis Navellier, value investor Jamie Dlougosch, and fund manager Ken Kam .
(For more on the advisors below, please click on their photos.)
"US Steel (X NYSE) continues to be a stellar technical performer,
outpacing the general market on a relative-strength basis since May 2004," says
Bernie Schaeffer, editor of The Option Advisor. "The
stock recently set a new all-time high today, as it continues to soar along
the support of its rising 10-week and 20-week moving averages. However, it
seems that X's technical performance has gone unnoticed on Wall Street, as eight
of the 13 covering analysts still rate the shares a 'hold' or worse.
Naturally, any upgrades from this bunch of holdouts could push the security
higher. Even the short-selling community continues to pan the shares, as the 3.5 million
shares are sold short, accounting for more than 12% of the total float. Such an
accumulation of pessimistic positions could provide ample fuel for a
short-covering rally, thus keeping the uptrend intact. For options traders, we
recommend buying the US Steel July 55 call."
"In my search for risk reduction and growth at a reasonable price,
the steel industry fits my parameters quite well," says Jamie
Dlugosch, editor of The Rational Investor.
"Schnitzer Steel Industries (SCHN
NASDAQ) is involved in recycling and steel manufacturing. The
rise in steel prices has helped the company grow, and its
shares have followed the ascent. With growth expected to continue in the
near term, SCHN offers some compelling value. As a low-beta stock, the risk level is reasonable
with the potential for significant returns. SCHN trades for a tiny eight times earnings.
I would expect the company to beat expectations here as the price of steel appears
to be holding steady. In fact, as world economies grow, prices could very well
rise in the coming months. Buy up to $43 per share. My target is $60."
"We are reinforcing our portfolios with steel stocks,"
saysLouis Navellier, editor of Emerging Growth Letter.
"
Not only do the steel stocks on our Buy List have incredible
sales and earnings growth, but they also have extremely low p/e
ratios. Ipsco (IPS
NYSE) reported that its fourth-quarter earnings surged over 1,800%, and sales
more than doubled. Yet the stock is still trading at barely six times this year’s
estimated earnings. Nucor (NUE
NYSE), one of my favorite steel stocks, recently announced that earnings soared over
1,500% to $2.12 per share. Nucor expects to earn between $1.70–$1.90 per share
in the first quarter, up from 72 cents a year ago. Commercial Metals (CMC
NASDAQ) operates domestic
mini-mills. Its recycling unit operates metals-processing plants that shred, shear and
pulverize scrap metal, which is then sold to steel mills. The stock has
been appreciating very steadily yet is trading at only 8.8 times this
year’s estimated earnings. I believe that its low p/e and strong growth will
continue to attract buying."
"Rising crude oil prices have been dominating headlines for over a
year, but seemingly lost amidst this focus on oil has been the story of steel,"
says Ken Kam in Marketscope. "Driven by many of
the same dynamics as oil (strong Asian demand and tight global capacity), the
rise of steel has been no less spectacular and steel companies are
enjoying tremendous profits. Looking forward, it seems likely that this strong demand
for steel will ultimately have an effect on the iron ore, which is used in
making steel. At least that is what our top 'm100 investors' are betting on with
Cleveland Cliffs (CLF
NYSE), the largest miner of iron ore in North America. The
‘Best Investors’ at Marketocracy have been holding CLF for a long time. CLF now ranks within
the top 3% of all holdings in the Best Investors’ portfolio. Despite the strong
run up in the stock, continued buying by the 'Best' suggest that iron
ore prices and Cleveland-Cliffs' fortunes have more room to
run."
