"Steel" These Stocks
04/08/2005 12:00 am EST
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."