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Recycled Steel Impacts Swinging Sector

September 22, 2013 | About:
Sally Jones

Sally Jones

49 followers
With China’s steel sector slowing, it is still the world’s largest steel producer, followed by Japan, and the U.S. coming in third place. World Steel reports that U.S. crude steel production is down 2.9% for the month of August 2013, year over year. China’s steel production for the same month was up 12.8% compared to August 2012. Japan’s production is flat, down by 0.6% over last August. The most-recycled material, steel, is influencing the domestic market with around 66% of U.S. steel now produced from recycled scrap.

The steel business is known for volatility and swings in gross and net margins, due to the cyclic nature of the business and economic conditions. According to Nasdaq.com, the U.S. steel market will remain down in 2013, based on a glut of imported steel mostly from China.

Here’s a look at USAP, and two more steel companies on a 52-week low. The steel sector currently lists 5 companies out of 46 on a 52-week low. The low ratio is 0.11.

Universal Stainless & Alloy Products (USAP)

Down 16% over 12 months, Universal Stainless & Alloy Products has a market cap of $226.15 million; its shares were traded at around $32.35 with a P/E ratio of 54.40 and P/B ratio of 1.10.

The current share price is around $32.35.

Incorporated in 1994, Universal Stainless & Alloy Products, through its wholly owned subsidiaries, manufactures and markets semi-finished and finished specialty steel products, including stainless steel, tool steel and certain other alloyed steels.

With an annual average earnings growth of 11.9% over the past 10 years, Universal Stainless & Alloy Products had earnings in eight of the last ten years. The company has had a positive operating cash flow in every year in the past decade except for 2004.

Guru Action: As of June 30, 2013, three guru stakeholders hold USAP and there is very active insider buying by Fournier’s firm Pennant Capital Management, a 10% owner.

Alan Fournier of Pennant Capital Management, made his tenth purchase of USAP in 2013, as of July 31, 2013, buying 7,000 shares at an average price of $32 for a 1.1% gain. This gain comes after six quarters of losses, bottoming out at 23.9% in the second quarter of 2012 when he bought 339,230 shares at an average price of $42.49 per share. He now owns 1,143,021 for 16.35% shares outstanding.

Michael Price made a new buy in the second quarter of 82,909 shares at an average price of $32 per share for a gain of 1.1%.

Long-time stakeholder Chuck Royce also gained 1.1% when he bought 2,500 shares at an average price of $32 per share. Royce owns 572,408 shares or 8.19% of shares outstanding.

Track share pricing, revenue and net income:

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Friedman Industries (FRD) – Yield 4.20%

Up 0 % over 12 months, Friedman Industries has a market cap of $67.99 million, and trades with a P/E of 13.90.

The current share price is around $9.95, or 16.9% off the 52-week high of $11.98.

Incorporated in 1965, Friedman Industries is engaged in the pipe manufacturing, steel coil processing and steel and pipe distribution in the U.S. The company purchases hot-rolled steel coils; processes the coils into flat, finished sheet, and plate. It also manufactures, purchases, processes, and markets tubular products, including line and oil country pipes, as well as pipes for structural and piling purposes.

Guru Action: As of June 30, 2013, Jim Simons is the sole guru stakeholder and there is active insider trading.

Jim Simons increased his position by 2.89% in the second quarter of 2013, buying 11,300 shares at an average price of $9.68 per share, for a gain of 2.7%. His current holding of 401,900 shares is 5.91% of shares outstanding. In his five-year history, he has bought 245,600 shares at an average price of $8.73 for a gain of 14%. He has sold 40,700 shares at an average price of $6.45 for a gain of 54%.

Track share pricing, revenue and net income:

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China Steel Corporation (CISXF) – Yield 1.03%

Down 11% over 12 months, China Steel Corporation has a market cap of $12.96 billion, and trades with a P/E of 31.50 and a P/B of 1.30.

The current share price is around $16.81, or 17.9% off the 52-week high of $20.48.

China Steel Corporation manufactures steel products. Its product portfolio comprises of steel plates, bars, wire rods, hot-rolled coils, sheets, cold-rolled coils and coated steel products, used for various structures and home building.

Guru Action: As of June 30, 2013, there are no guru stakeholders or insider trading to report.

Track share pricing, revenue and net income:

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About the author:

Sally Jones
Sally Jones writes about Real Time Picks. She says, "I truly enjoy watching the Gurus in realtime and telling their story."

Rating: 4.5/5 (2 votes)

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