For Immediate Release
Chicago, IL – August 27, 2014 – Zacks Equity Research highlights RCS Capital (RCAP-Free Report) as the Bull of the Day and hhgregg (HGG-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on ArcelorMittal (MT-Free Report), U.S. Steel (X-Free Report) and AK Steel (AKS-Free Report).
Here is a synopsis of all five stocks:
Bull of the Day:
In the Zero Interest Rate Policy world, many investors have struggled to find reasonable yields. You either have to increase your maturities on your bonds and buy them further out or you have to make concessions on the credit quality. Either way you are essentially increasing your risk in order to increase your income. While that may be perfectly acceptable for some, it’s not acceptable for seniors who are looking for income to fund their retirement lifestyle.
The options have become increasingly limited. Investment grade corporate bonds have yields near twenty year lows right now and sovereign debt is paying virtually nothing. As a result, people have looked in other areas or alternative investments in order to find yield.
One company has entered this space and helped baby boomers find income from real estate investment trusts that hold some of the highest quality real estate money can buy. RCS Capital (RCAP-Free Report) is a wholesale broker-dealer and an industry leading multi-product distributor of sector-specific direct investment programs. The distributed investment programs are designed to provide “Durable Income” and capital preservation.
Basically this company wants you to diversify your current investment portfolio into one of their REITs or other alternative investments. Right now only about 3% of the $7.5 trillion of investable assets the Mass Affluent of America have is invested in alternative and direct investments. RCS sees this as a huge opportunity for them to grab market share.
Bear of the Day:
The electronics retail business is a tough one. If you don’t believe me, go ask Best Buy. They’ve been struggling to become more than Amazon’s show room for quite some time. With the ease of access to products via the internet, investing tons of money in a brick and mortar location is becoming less and less profitable. You could look back and find plenty of examples of these types of locations going under and ultimately going broke.
That’s why I can’t help but think of today’s Bear of the Day, hhgregg (HGG-Free Report), as the next Circuit City. Remember that old electronics store that lost out to Best Buy and went under? I’ve set foot in an hhgregg location that was in the same building that used to house Circuit City. And there they were, selling electronics just like Circuit City did before going under.
I actually enjoyed my shopping experience at HGG. The people working there were very friendly and helped me pick out a computer for my Mom’s Christmas present. I got a great deal and thought to myself, “How can this place stay in business selling things this cheap?”
That’s exactly what hhgregg does. They are a specialty retailer of premium video products, appliances, audio products, computers and accessories with seventy nine stores in Alabama, Georgia, Indiana, Kentucky, North Carolina, Ohio, South Carolina and Tennessee. If you ever go to one I’m sure you’ll see it the same way that I did, like a Circuit City.
Analysts are equally unimpressed with this Zacks Rank #5 (Strong Sell). Over the last 30 days, ten analysts have lowered their earnings estimates for the current quarter, next quarter, and the current year. Next year isn’t looking much better as eight analysts lowered their bar. The revisions have pushed the consensus estimate for the current year down from a 12 cent gain to a 31 cent loss per share. Next year’s numbers have fallen from a 12 cent gain to a 21 cent loss.
China, U.S. Lift Global Steel Production
Global crude steel output rose for a sixth consecutive month in July as gains across China and the U.S. offset a decline in the European Union – according to a recent World Steel Association (“WSA”) report. Healthy gains across the Middle East and Africa also supported the growth. However, the pace of growth slowed on a monthly basis in the reported month.
According to the international trade body for the iron and steel industry, crude steel production for 65 reporting nations nudged up 1.7% year over year in July to 137 million tons (Mt). This follows a 3.1% gain last month.
By regions, production data paints a generally positive picture with gains registered across all areas barring the European Union.
Growth was seen across major Asian producers except Japan – the second largest producer – which saw a flat production at 9.3 Mt. Higher sales tax is affecting steel demand in that country. Output from China – the world's biggest steel maker – went up 1.5% year over year to 68.3 Mt in July. Production in India, the fourth-largest producer, rose 1.7% to around 7 Mt. South Korea raked in a 6.2% gain to 5.9 Mt. Consolidated output were up 1.7% to 92.4 Mt in Asia.
In North America, crude steel production rose 2.3% to 7.6 Mt in the U.S. – the third-largest steelmaker. Output in Canada went up 5.7% to around 1.1 Mt. Overall production for the region was up 2% to roughly 10.4 Mt.
In the Europe Union, production from Germany – the biggest producer in the region – rose 1.5% to 3.4 Mt. Output fell 3.6% in Italy to 2 Mt while rising 1.6% to 1.4 Mt in France. Spain saw a 5.9% rise to 1 Mt. Production slipped 4.4% in the UK to around 1 Mt. Total output dipped 2% in the European Union to 13.3 Mt.
Output in the Middle East moved up 8.3% to 2.4 Mt with healthy gains witnessed across Iran, Qatar and Saudi Arabia. Africa logged a solid 21.2% gain to 1.5 Mt in the reported month.
Among other notable producers, production from Turkey was up 1% to 2.8 Mt. Russia saw a healthy 8.1% rise to 6.2 Mt while Ukraine – which have been battered by fierce conflict with Russia – recorded a 11.7% decline to 2.5 Mt. Output from Brazil, the largest producer in South America, inched up 0.5% to 2.9 Mt.
Crude steel capacity utilization ratio for the reporting countries was 75.4% in July 2014, down from 76.6% a year ago and 78.3% in the previous month.
Steelmakers globally remain hobbled by challenging market fundamentals and weak pricing. Overcapacity in the industry, a flood of cheap imports and weak demand in Europe hammered steel prices for the most part of 2013, hurting margins of major producers including ArcelorMittal (MT-Free Report), U.S. Steel (X-Free Report) and AK Steel (AKS-Free Report).
With the global economy gradually on the mend and activities picking up in the construction sector, 2014 promises to be a transition year for the steel industry. The WSA sees continued recovery in steel demand and expects global steel usage to increase 3.1% this year and further rise 3.3% in 2015. Improving demand is also expected to jack up steel prices.
However, the industry faces challenges in form of an expected deceleration in steel usage in China due to a slowdown in the country's housing market and weaker infrastructure investment growth.
Nevertheless, a gradually healing economy, strength in the automotive market and a rebound in non-residential construction and housing markets should provide a much-needed thrust to the U.S. steel industry this year. Moreover, an expected rise in steel usage in the Euro-zone on the back of a flourishing auto sector and a recovering construction market looks encouraging after a lumpy 2013.
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