Keep an eye on shares of US Steel (X). The stock has dropped to $42 per share. I will be looking to start a position in US Steel in the 30′s. US Steel is currently trading at just 7 times next year’s earnings projections. Even if the company’s 2011 EPS is off by 25%, US Steel would still trade at just 9 times earnings. The stock would be an absolute steal in the 30′s.
Today’s News
January 27, 2010 By 1 Comment
Apple (AAPL) unveiled its new tablet PC named the iPad. iPad pricing will range from $499 to $829 depending on options such as memory and 3G coverage. According to CNBC’s tech reporter Jim Goldman, the iPad looks like a giant iPhone. Is the device needed in a market with laptops, netbooks, and smartphones? Probably not but my guess is Apple will still sell millions of them.
US Steel (X) is taking it on the chin again today dropping 8% to $45 per share. Shares have been downgraded by several firms and Fitch cut its debt ratings below investment grade. While I have no position in the stock, shares are beginning to look attractive. The stock is a decent long turn turnaround play.
Toyota Motor (TM) has temporarily stopped selling 8 models in the US. The Corolla, Camry, Avalon, Matrix, RAV4, Tundra, Highlander, and Sequoia all have problems with a sticky accelerator that causes these models to accelerate on their own. Toyota shares are down over 9% based on the news. The hit to Toyota’s reputation may create an opening for other auto companies like Ford, Honda, GM to gain market share.
US Steel’s Stock Slammed
January 26, 2010 By Leave a Comment
Today US Steel (X) reported a loss of 267 million dollars for Q4 of 2009. The $1.65 per share loss was 22 cents below analysts expectations of a loss of $1.44. The big surprise is that US Steel is forecasting a similar loss for Q1 of 2010. The projected loss would be the 5th straight loss for US Steel. The stock has been pummeled dropping over 10% to $50.50 per share today. I listed US Steel in a post last week as one of three stocks that investors should consider selling. I believed that US Steel’s stock valuation was too rich when shares were trading over $65 last week. I received a lot of emails from individuals who said that I was crazy and that the steel giant was only headed upward. Over the past week US Steel has lost 23% of its value and I don’t believe shares have totally bottomed out.
Why did I think US Steel was overvalued? The stock was priced for perfection. Analysts were all over television screens telling investors to buy US Steel despite its hefty PE ratio. Merrill Lynch and Deutsche Bank were adding US Steel to their buy lists when the stock was trading at its 52 week high. The stock was priced for a robust economic recovery, rising steel prices and lower raw material costs. It was obvious that any negative news was going to punish the stock badly.
So what do I expect now? I expect brokerage firms to change their opinions and place US Steel on their sell lists. The stock is a screaming buy in the upper 20′s but I doubt it will ever get that low. I would actually look at buying shares of US Steel in the high 30′s to mid 40′s now that expectations have been tempered.
3 Stocks To Keep An Eye On
January 19, 2010 By Leave a Comment
1. Amazon (AMZN)- The ecommerce giant has been on a tear over the past year rising from the high 40′s to $127 per share. Many analysts have placed a buy rating on the stock and price targets keep going up. Forward earnings are expected to come in at $2.58. Price to earnings growth is 2.5. This stock is priced for continued earnings growth of 20% or more. I like Amazon’s business model but the stock is currently trading at 75 times earnings. Any hint of slowing earnings growth over the next year and Amazon’s shares will get hammered.
2. Research In Motion (RIMM)-Research in Motion appears to be fairly valued and has been one of the best tech companies of the past decade. RIMM grew its revenue by over 40% last quarter but the smartphone market is becoming a crowded place with increasing competition from Apple and Google. Palm has just signed a deal with Verizon to begin offering their smartphones at the nation’s largest wireless carrier. It appears that RIMM will have to increase spending on marketing just to maintain their current market share.
3. US Steel (X) – The nation’s largest steel company saw its shares decimated during the global recession. Shares have rebounded almost 300% from the $16 level. While I like US Steel as a long term holding; the stock has gotten ahead of itself over the near term. US Steel is trading at $65 a share and has a forward PE of 52. This is based on estimated earnings of $1.24. Some analysts are even anticipating a loss as large as $3 per share for 2010. If you were one of the smart investors that got in at $40 or below; it may be a good time to trim your position and take some profits.
US Steel
March 25, 2009 By Leave a Comment
US Steel (X) has had a nice run up to over $25 a share. I have sold my position at this time. There is too much short interest building in this stock and I think that a decline in the share price may be coming soon. I bought shares between $18 and $19 so I have a decent gain over the last 2 weeks.
Steel Stocks Still Bottoming
March 18, 2009 By Leave a Comment
Shares of Nucor (NUE) dropped to $33 yesterday amid news that the steel operator expects to report a 1st quarter loss due to weak global demand for steel. Nucor expects a weak 2nd and 3rd quarter in 2009 if economic conditions remain the same. US Steel, Ak Steel and Arcleor Mittal were all down as well on Nucor’s news. I think that metal stocks represent an intriguing value right now and have been buying shares of US Steel in the teens. If stimulus packages done in the US and China have any effect; I would expect the demand for basic materials to rise as well.
Metals Look Cheap
February 25, 2009 By Leave a Comment
US Steel (X) is looking attractive at $22. The steelmaker is expected to earn $5.40 per share in 2010 which means the stock is trading at 4 times next years earnings. The industry average for steel companies is 7.5 which would value US Steel at $40.50.
Alcoa (AA) is interesting at $6 per share. Analysts expect .60 per share earnings for next year which would place a multiple of 10 on Alcoa. The scary thing about Alcoa is that the company may have negative earnings if aluminum prices stay cheap.
AK Steel (AKS) looks like at a takeover target at its current price. The company has a decent balance sheet and currently trades at $6.68. 2010 earnings are expected to come in around $1.70. It might be worth buying in the mid 5′s.
Three Missed Opportunities
January 9, 2009 By 1 Comment
Below is a list of some investments that i wish i had pulled the trigger on:
I had placed Research in Motion(RIMM) on my watchlist when it was $37. I kept waiting for RIMM to drop to $32 to buy. It never happened and now RIMM is at $47.
I could have bought Transocean (RIG) at $47. I thought that it would dip back to its 52 week low of $41.95. Transocean is now at $55.
I missed US Steel(X) at $25. It looked cheap at $25 but I kept waiting for it to get cheaper. US Steel had just bounced off its low of $20.71. US Steel now trades at $37.
And one more.
I thought about buying Palm(PALM) at $2.50 per share last week. The stock is now over $6 per share on the upcoming release of its new smartphone, the Palm Pre. I don’t regret not buying Palm despite the stock’s huge run up because I couldn’t find any fundamental reason to invest in Palm. Even though the stock is at 6 now, it could just as easily trade at $1 based on the company’s troubles.
