Steel stocks have been left “bent out of shape.”
- United States Steel (X) plummeted from $47 to $17.50
- Steel Dynamics (STLD) fell from $50 to less than $29
- AK Steel Holding (AKS) was cut in half from $5 to less than $2.25
- Nucor Corporation (NUE) dropped from $68 to less than $50
However, it appears opportunity may soon emerge from this down and out sector.
For one, as we move closer to the March 2019 deadline, we may be nearing the end of the trade war.
“I think China wants to get it resolved. Their economy’s not doing well,” Trump said, as quoted by Reuters. “I think that gives them a great incentive to negotiate.”
Two, we’re beginning to see insiders buy.
United States Steel CFO Kevin Bradley just bought 10,000 shares in early December 2018 at $20.33 apiece for $203,000. AK Steel Holding insiders picked up another $81,000 worth of shares, says Barron’s, as Steel Dynamics saw up to $677,000 worth of buys over the last year.
Three, the one thing that all political parties can agree on is the need for better infrastructure.
Congress and President Trump have already acknowledged the need for infrastructure funding. In fact, both sides are eyeing the possibility of an Infrastructure Bill in 2019.
One of the biggest catalysts could be the border wall.
In recent days, steel stocks have retaken the spotlight after President Trump noted the border wall could be made of steel rather than concrete. In fact, he just asked Congress for $5.7 billion for a “234 miles of physical barrier” made of steel, reported The Washington Post.
“V.P. Mike Pence and group had a productive meeting with the Schumer/Pelosi representatives today. Many details of Border Security were discussed. We are now planning a Steel Barrier rather than concrete. It is both stronger & less obtrusive. Good solution, and made in the U.S.A.,” tweeted the President.
Should that help push things through Congress, it could be a sizable catalyst for steel.
After all, a US-Mexico wall could require up to three million tons of steel, according to the American Iron and Steel Institute, as quoted by S&P Global Platts.
As some of the country’s top steel stocks sit at record lows, The Cheap Investor will look for potential opportunities.