Have Steel Stocks Bottomed?
Of the stocks in the steel sector Mastery is most intrigued by Steel Dynamics (STLD), U.S. Steel Corp (X) and AK Steel (AKS). X and AKS have huge short interest and have been horrible investments in the past 12 months. The exception to would be STLD which is holding up well. The steel sector is out of favor with Wall Street, that's why we want in.
United States Steel Corp (X) is trading at $18.04 and its shares are 12% from its 52-week low. The Big X has a massive 30% short interest and its stock is down 24% YTD.
AK Steel Holding Corp (AKS) is trading at $3.38 and its shares are 18% from its 52-week low. AKS is also down 24% YTD and carries a 32% short interest.
Steel Dynamics Inc (STLD) is trading at $15.03 and near the top of its 12 month range. STLD short interest is tiny, at 4%. STLD is up 10% YTD, beating X and AKS by a landslide.
Despite the terrible performance of X and AKS they have finally bottomed. Both of those stocks have rebounded in the past month so it appears the worst could be over. Steel stocks have been killed in the past two years thanks to a slow worldwide economy and excess production capacity. This has caused steel prices to drop and everyone has enjoyed it but big steel.
Mastery expects the stock pickers to finally take notice of this sector and with such high short interest the tide could turn. Then again you could argue the shorts are looking for a winning bet so maybe X and AKS continue to suffer. However one look at the charts and it's clear the shorts are losing the battle in AKS and X. If you are going to play this bet expect volatility but we believe the worst is behind us.
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