Investing in Steel Companies that Remain Competitive Even When Prices Fall: An Expert Analyst Discusses His Top Steel Picks with The Wall Street Transcript

Wall Street Transcript

67 WALL STREET, New York - April 17, 2013 - The Wall Street Transcript has just published its Building Materials, Construction and Housing Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: North American Electrical Transmission, Infrastructure Build in Emerging Markets, Strong End Markets for Building Products, Energy infrastructure companies, Infrastructure spending

Companies include: Steel Dynamics Inc. (STLD), Nucor Corporation (NUE), United States Steel Corp. (X), BP plc (BP) and many more.

In the following excerpt from the Building Materials, Construction and Housing Report, an expert analyst discusses the outlook for the sector for investors:

TWST: You mentioned that with both Nucor and Steel Dynamics, you liked that they reinvested in their companies. Is that something you look for when you are evaluating stocks and companies?

Mr. Gershuni: Certainly reinvestment is one area we look at, but there are a number of factors that can make us like a company. For example, if interest rates were to go up, then the discount rate with U.S. Steel would change with the unfunded pension. That's equity value that does nothing toward investing in the company itself. Or, if drilling activity increased and the rig count were to go up, that would disproportionally impact U.S. Steel because they've got a very sizable tubular business.

U.S. Steel is benefiting now because in the Gulf of Mexico, post the BP (BP) spill, you have more deep rigs, and U.S. Steel made an investment in that area in 2006 and 2007 when they bought the facilities in the first place. But we definitely like to see companies that are definitely investing in themselves. We like to see companies that take advantage of a quiet period, invest in themselves and improve their earnings profile on a go-forward basis. That definitely contributes to a positive view for us.

TWST: What should investors interested in the steel space be watching over the next year?

Mr. Gershuni: Domestically, you want to continue to see positive trends in our steel-intensive leading indicators, like factory orders, building permits, industrial production and so forth. We also want to make sure that the macro global world is healthy as well, because as an investor, things can be doing well here, but imports could take market share if things are weakening.

For example, when Europe has excess steel capacity and they are offering to sell it at a lower price, then they can take market share. Iron ore prices and coking coal prices are big components of the cost structure to make steel. If they fall, that could...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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