As the first quarter of 2023 comes to a close, investors are looking at companies that have performed well so far this year.
While sectors that outperformed in 2022, such as energy, have had a change in fortune this year, other sectors that were down last year have recovered. One of them is basic materials, which has gained 4.41%.
Despite concerns for a potential recession this year, investors may still find value prospects among companies that outperformed the Standard & Poor’s 500 Index by at least 5% over the past three months. Year to date, the benchmark index has returned about 5.50% as of the time of writing.
As of March 31, the GuruFocus All-in-One Screener, a Premium feature, found several basic materials stocks that had a higher return relative to the index for the period. It also looked for companies with a business predictability rank of at least one out of five stars.
Steel companies that met these criteria were Nucor Corp. (NUE, Financial), Steel Dynamics Inc. (STLD, Financial), Reliance Steel & Aluminum Co. (ES) and Cleveland-Cliffs Inc. (CLF, Financial).
Nucor
Outperforming the index by approximately 8.76% over the past three months, Nucor (NUE, Financial) has a $38.39 billion market cap; its shares were trading around $152.37 on Fridaywith a price-earnings ratio of 5.30, a price-book ratio of 2.10 and a price-sales ratio of 0.97.
The Charlotte, North Carolina-based company is one of the largest producers of steel and related products in North America. It also recycles scrap metal.
The GF Value Line suggests the stock is fairly valued currently based on historical ratios, past performance and analysts’ future earnings projections.
At 88 out of 100, the GF Score indicates the company has good outperformance potential. While it received high ratings for profitability, growth, financial strength and momentum, the GF Value rank was low.
Nucor also has a one-star predictability rank. According to GuruFocus research, companies with this rank return an average of 1.1% annually over a 10-year period.
Of the gurus invested in Nucor, Jeremy Grantham (Trades, Portfolio) has the largest holding with 0.12% of its outstanding shares. Ken Fisher (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), John Hussman (Trades, Portfolio) and Jefferies Group (Trades, Portfolio) also have notable positions in the stock.
Steel Dynamics
Beating the benchmark by around 7.92% for the three-month period, Steel Dynamics (STLD, Financial) has a market cap of $19.13 billion; its shares were trading around $111.49 on Friday with a price-earnings ratio of 5.36, a price-book ratio of 2.37 and a price-sales ratio of 0.92.
The company, which is headquartered in Fort Wayne, Indiana, recycles metal as well as produces hot roll, cold roll and coated sheet steel and structural beams and shapes, along with a number of other related products.
According to the GF Value Line, the stock is fairly valued currently.
The GF Score of 90 suggests the company has good outperformance potential, driven by high ratings for three of the criteria, middling marks for momentum and a low GF Value rank.
Steel Dynamics also has a 2.5-star predictability rank. GuruFocus data shows companies with this rank return, on average, 7.3% annually.
With a 0.20% position, Grantham is the company’s largest guru shareholder. Other guru investors are Fisher, Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Greenblatt, Jefferies Group (Trades, Portfolio), Jones and Ray Dalio (Trades, Portfolio)’s Bridgewater Associates.
Reliance Steel & Aluminum
Eclipsing the benchmark index by around 17.97% over the past quarter, Reliance Steel & Aluminum (RS, Financial) has a $15.19 billion market cap; its shares were trading around $254.60 on Friday with a price-earnings ratio of 8.54, a price-book ratio of 2.11 and a price-sales ratio of 0.92.
The Scottsdale, Arizona-based company provides metals processing and inventory management services, offering a wide variety of products to customers, including stainless steel, aluminum and alloys.
Based on the GF Value Line, the stock appears to be modestly overvalued currently.
The GF Score of 82 implies the company has good outperformance potential on the back of high profitability, growth and financial strength ratings. The GF Value and momentum ranks, however, were low.
The company also has a one-star predictability rank.
Yacktman Asset Management (Trades, Portfolio) has the largest stake in Reliance Steel with 2.14% of its outstanding shares. Chuck Royce (Trades, Portfolio), Simons’ firm, Grantham, Greenblatt and several other gurus also have significant holdings.
Cleveland-Cliffs
Topping the S&P 500 by 6.33%, Cleveland-Cliffs (CLF, Financial) has a market cap of $9.47 billion; its shares were trading around $18.31 on Friday with a price-earnings ratio of 7.29, a price-book ratio of 1.21 and a price-sales ratio of 0.41.
In addition to manufacturing flat-rolled steel, the company, which is headquartered in Cleveland, owns iron ore mining operations.
The GF Value Line suggests the stock is significantly undervalued currently.
Further, the company has high outperformance potential based on its GF Score of 91. Although Cleveland-Cliffs raked in high ratings for four of the criteria, the financial strength rank was more moderate.
It also has a one-star predictability rank, which is on watch due to a slowdown in revenue per share growth.
Holding a 1.65% stake, Fisher is Cleveland-Cliffs’ largest guru shareholder. Grantham and Simons’ firm also have large positions.
