Headquartered in Bridgeville, Pa., Universal Stainless & Alloy Products (USAP) manufactures specialty steel products, including stainless steel, tool steel and other alloyed steels. Fournier’s hedge fund Pennant Capital is 10% owner of USAP, established in 1994. Universal Stainless sells to service centers in the manufacturing sector.
His holding history:
The global demand for steel is projected to increase by 3.2% in 2013, with most of the demand coming from China. However, the largest steel producer in the world, China’s domestic production of steel meets its consumption for building new urban infrastructure for the ever-increasing urban population.
USAP's products fill demands for steel and alloys in industrial markets such as aerospace, automotive and heavy equipment. Globally, USAP competes with domestic and foreign producers of specialty steel products. The U.S. produced a fraction of steel, 88.6 million tons in 2012, compared to Asia’s 716.5 million tons of crude steel, according to data from the World Steel Association.
Universal Stainless & Alloy Products has a market cap of $253 million; its shares are traded around $36.35 with a P/E ratio of 17.2 and P/S ratio of 1.0796. Universal Stainless Steel Products shows positive earnings in eight of the last 10 years and positive operating cash flow, except for 2004. The company’s margins fluctuate with economic conditions and the influence of a competitive steel industry.
USAP 10-Year Financials
USAP data by GuruFocus.com
Pennant Capital Management’s portfolio lists 42 stocks with a total value of $4.7 billion, and a quarter-over-quarter turnover of 10%. The Pennant Capital portfolio heavyweight sectors are currently technology 28.7%, consumer cyclical 17.7% and healthcare 13.7%.
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Steeled and steely on USAP in the first quarter of 2013, Pennant Capital’s string of USAP adds may reflect the steel company's expansion and a rebounding steel industry.
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