Yesterday Alan Fournier, fund manager of Pennant Capital Management, made his fifth purchase of Universal Stainless & Alloy Products (USAP) stock in 2013, adding another 0.82% of USAP at $35.85. The current price of USAP is $36.69. Fournier now owns 1,112,768 shares of USAP. The stock price has gone up 33 cents per share since Fournier’s last add on March 6, 2013. USAP manufactures specialty steel products, including stainless steel, tool steel and other alloyed steels. According to SEC filings, Fournier’s hedge fund Pennant Capital is 10% owner of USAP. Here’s Alan Fournier’s Holding History of USAP.
A brief look at the global steel industry related to USAP: Selling to global customers in aerospace, automotive, heavy equipment and other industrial markets, USAP competes with domestic and foreign producers of specialty steel products. The highly competitive industry adjusts to unfair pricing practices by foreign producers. As the largest producer and consumer of steel in the world, China influences steel prices with its massive imports, as well as exports and tariffs. As the largest steel producer globally, China balances its domestic production and consumption, making a major impact on steel prices. In 2012, Asia produced 716.5 million tons of crude steel, compared to the U.S. producing only 88.6 million tons (World Steel Association). According to Bloomberg and others, the global demand for steel is projected to increase by 3.2% in 2013, with most of the demand coming from China. With a rapidly increasing urban population, China requires more infrastructure and steel to build railroads and make sewage pipes.
Universal Stainless & Alloy Products has a market cap of $249.7 million; its shares were traded at around $36.22 with a P/E ratio of 15.1 and P/S ratio of 1. With positive earnings in eight of the last ten years and positive operating cash flow in every year in the past decade except 2004, USAP has a strong track record. USAP's gross and net margins fluctuate as a reflection of economic conditions and the competitive global industry.
Take a look at Guru Alan Fournier’s top buys, top sells and top holdings.
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