Steel Dynamics (STLD) is an EAF Steel Stock with the Most Upside Opportunity in the Next Year: Mark L. Parr, Managing Director and Equity Research Analyst, Discusses His Picks with The Wall Street Transcript

Wall Street Transcript

67 WALL STREET, New York - April 15, 2013 - The Wall Street Transcript has just published its Metals and Mining 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: Precious Metals, Global Iron Ore Production, Emerging Market Infrastructure Construction, Midcap and Small-Cap Consolidation Activity

Companies include: United States Steel Corp. (X), Nucor Corporation (NUE), Allegheny Technologies Inc. (ATI), Cliffs Natural Resources Inc. (CLF), Walter Energy, Inc. (WLT), GrafTech International Ltd. (GTI), Steel Dynamics Inc. (STLD), Commercial Metals Co. (CMC), Reliance Steel & Aluminum Co. (RS), Worthington Industries, Inc. (WOR), Olympic Steel Inc. (ZEUS), Thomson S.A. (TMS), Haynes International Inc. (HAYN), Kaiser Aluminum Corporation (KALU) and many more.

In the following excerpt from the Metals and Mining Report, an expert analyst discusses the outlook for the sector for investors:

TWST: Considering all of those things, which EAF steel stock would you recommend as a best bet for this year?

Mr. Parr: In terms of looking at underlying valuation and recent stock performance, our favorite idea right now would probably be Steel Dynamics (STLD), with the most upside opportunity in the next six to 12 months. We are also favorably disposed to shares of Nucor and Commercial Metals (CMC). All three of these companies have modest leverage, reasonable dividend yields and they're all scrap users to a much greater extent than blast furnace/BOF mills. In addition, these three companies are also heavily exposed to construction side of the U.S. economy.

TWST: What risks and headwinds could disrupt your positive outlook on EAF steel?

Mr. Parr: Clearly, given the basis of the thesis in the raw materials side, naturally you would look, first and foremost, for risk factors. Some of the things that we pay attention to very closely is the trade flows of scrap out of North America into places like Turkey and into a number of Asian markets.

Recently, we have seen a significant slowing of the Turkish economy and also a slowing of export of steel out of Turkey. Turkey has also had export restraint headwinds in terms of anticompany duties imposed by some Middle Eastern countries. And if that were to turn around and the Turkish market became much more vibrant, it could present a risk to our raw material thesis.

Likewise, as you look into the Asian marketplace, where we've seen Japan in more of a recessionary mode, and we've seen a much slower growth environment unfold for the Chinese marketplace. If there were a sudden shift in the economic momentum of those economies, which resulted in a significant increase in their demand for imported scrap materials, that also is risk. I'd also point out that China, historically, has been very opportunistic, and so for the Chinese market it's not so much...

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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