The Steel sector has not been doing well this year due to the huge increase in raw materials (Iron Ore and metallurgical coal). Operating margins have been squeezed as a result.
While many steel companies rallied to their highs (such as steel dynamics and Nucor), US Steel is still trading at a rather low multiple.
Since US Steel has its own iron ore mines, I feel that this company should benefit the most from rising iron ore pricings as compared to its peers. As a result, I am thinking that the other steel companies are overvalued compared to US Steel.
It is true that currently, US Steel has one of the worst operating margins due to its method of making steel as compared to mini mills. However, the huge increase in steel pricings (taking effect this Jan) should help US steel by a huge margin.
I am bullish on US steel once again.
I have a target of $60 in sight, and I will consider selling it there as traders might short and sell it there too due to the strong resistance at that level.
Currently, the stock has bounced from its support, this is a good time to accumulate US Steel shares as the market seems to surge higher to 12800.
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