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From towering skyscrapers to sleek automobiles, the evident presence of steel in our daily lives is really important. This is the main reason, the role steel companies play goes far beyond providing the material for our infrastructure and products. They are the unsung heroes of modern civilization, forming the very foundation upon which our world is built. This also makes the steel companies a very good investment for long-term investors.
In this blog post, we'll look at the best steel stocks based on their market value.
Steel companies are important because they play a vital role in the global economy. They produce the steel that is used in a wide range of products, from cars and buildings to appliances and medical equipment. Without steel, many of the products that we take for granted would not exist.
The steel industry is facing many challenges, including competition from China and other low-cost producers, as well as fluctuations in demand. However, there are also many opportunities for steel companies, such as the growing demand for infrastructure development in emerging markets and the increasing use of steel in automobiles.
Competition from China: China is the world's largest producer of steel, and it has been able to undercut the prices of steel producers in other countries. This has led to lower profits for steel companies in the United States and Europe.
Fluctuations in demand: The steel demand is cyclical, and it can be affected by a number of factors, such as the global economy, interest rates, and government spending.
Environmental regulations: Steel production is a carbon-intensive industry, and steel companies are facing increasing pressure to reduce their emissions.
Technological change: The steel industry is constantly evolving, and new technologies are emerging that could disrupt the industry.
High growth potential: The steel industry is expected to grow at a rate of 4.5% per year over the next five years.
Low valuations: Steel companies are currently trading at low valuations, which could mean that they are undervalued.
Defensive characteristics: Steel companies tend to be defensive investments, which means that they can be a good hedge against inflation and economic downturns.
Dividend income: Many steel companies pay dividends, which can provide investors with a steady stream of income.
Competition: Steel companies face a lot of competition from other producers, both domestic and foreign.
Cyclicality: The steel industry is cyclical, and steel companies can be affected by economic downturns.
Environmental concerns: Steel production is a carbon-intensive industry, and steel companies are facing increasing pressure to reduce their emissions.
Regulation: Steel companies are subject to several regulations, which can increase their costs.
JSW Steel, part of the JSW Group, is a leading steel manufacturer in India. Established in 1982, it has grown to a major player with a current crude steel production capacity of 28 MTPA. The company serves various industries and aims to expand its capacity to 45 MnTPA. In 2021, JSW Steel became the largest steel producer in India after acquiring BPSL. It owns the largest steel plant in India with a capacity of 12 MnTPA, showcasing its commitment to meeting the country's growing demand for high-quality steel products.
Tata Steel Ltd, established in 1907, Tata Steel is a global steel industry leader renowned for innovation. With a rich legacy and a focus on technology and infrastructure Tata Steel continues to be a significant player in the global steel scene, prioritising innovation and expansion. It holds the distinction of being Asia's first integrated private steel company. Operating across the entire steel value chain, from mining and processing iron ore and coal to producing and distributing finished products. With a target to increase domestic steelmaking capacity to 30 MnTPA by 2025, Tata Steel Ltd remains at the forefront of steel manufacturing in Asia.
Established in 1979 by Om Prakash Jindal, Jindal Steel & Power Limited (JSPL) is a leading Indian steel producer, contributing to the nation's economic growth. With a diverse product range and global presence in mining and power generation, JSPL operates in Australia, Botswana, Indonesia, Mauritius, Mozambique, Madagascar, Namibia, South Africa, Tanzania, and Zambia, showcasing its reach and influence in the global steel industry.
Founded in 1986, APL Apollo Tubes is India's largest structural steel tube manufacturer, embodying the "Make in India" philosophy. With extensive distribution networks and a commitment to world-class quality, the company has established a strong local presence. With a production capacity of 3.6 Million MTPA, APL Apollo Tubes is a trusted name in the Indian steel industry, offering a diverse range of steel products and serving various industry applications, including urban infrastructures, housing, irrigation, solar plants, greenhouses, and engineering.
Established in 1973, Steel Authority of India Limited (SAIL) is a leading government-owned steel producer in India and holds the prestigious "Maharatna" status. With five integrated steel plants strategically located in the eastern and central regions, SAIL is a key player in the country's Central Public Sector Enterprises. Committed to technological advancements and recognized for high-quality steel products, SAIL contributes significantly to infrastructure development, playing a pivotal role in driving India's economic growth.
Bonus- Stocks comparison by P/E ratio -
S.N0
Company
P/E Ratio
1.
JSW Steel
22.71
2.
Tata Steel
2669.89
3.
Jindal Steel
16.19
4.
APL Apollo Tubes
57.52
5.
SAIL (Steel Authority of India Ltd)
12.33
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In summary, the steel industry holds both challenges and opportunities for investors. Despite facing competition, cyclicality, and environmental concerns, companies like JSW Steel, Tata Steel, Jindal Steel, APL Apollo Tubes, and SAIL show promise. The industry is expected to grow at 4.5% annually, driven by demand in emerging markets and the automotive sector. While risks exist, such as regulatory changes, the defensive nature, low valuations, and potential for dividend income make steel companies appealing to long-term investors.
Disclaimer:
Please note that this blog is not any recommendation for buying or selling any stock. We always encourage the reader to do their research before investing in any stock.
In this article, we discuss 11 best steel stocks to buy today. If you want to see more stocks in this selection, check out 5 Best Steel Stocks To Buy Today.
The World Steel Association released its Short Range Outlook on April 14, and it expects steel demand to increase 0.4% in 2022 to 1.84 billion mt and grow 2.2% in 2023 to 1.88 billion mt. World Steel Director General Edwin Basson told the press on April 14:
"We expect growth to start coming in 2023 and this is on the presumption that the war in Ukraine will come to a conclusion sometime in this year and at least the end of this year we will begin to see a recovery in the steel use in those markets, but throughout our forecasts we have assumed that steel use in Russia and Ukraine is going to be way down from previous years, and that the impact will flow over."
Executives at top steel firms including United States Steel Corporation (NYSE:X), Nucor Corporation (NYSE:NUE), and Cleveland-Cliffs Inc. (NYSE:CLF) believe that tight supply chains in the automotive industry will eventually ease in 2023, driving demand and positive cash flows. These executives observed that energy, appliances, and automotive end markets will demand more steel next year, which is an optimistic catalyst for the industry. The steel executives were also confident that fixed contract tons recently negotiated for 2023 will safeguard their businesses against market turbulence.
Leon Topalian, Nucor president and CEO, said in a statement:
“During the third quarter, Congress passed the CHIPS Act and the Inflation Reduction Act, two pieces of legislation that will strengthen domestic manufacturing and create opportunities in the future for the American steel industry. We expect to start seeing the impacts of new federal infrastructure spending in 2023 as states continue to move forward with their projects.”
Our Methodology
We selected the following steel stocks based on positive analyst coverage, strong business fundamentals, and market visibility. We have assessed the hedge fund sentiment from Insider Monkey’s database of 920 elite hedge funds tracked as of the end of the third quarter of 2022.
11 Best Steel Stocks To Buy Today
Photo by Russ Ward on Unsplash
Number of Hedge Fund Holders: 5
Universal Stainless & Alloy Products, Inc. (NASDAQ:USAP) is a Pennsylvania-based company that manufactures and markets semi-finished and finished specialty steel products in the United States and internationally. Its products include stainless steel, nickel alloys, tool steel, and other alloyed steels. Universal Stainless & Alloy Products, Inc. (NASDAQ:USAP)’s Q3 2022 revenue of $46.19 million climbed 24.3% year-over-year, in-line with Wall Street estimates.
On November 18, Universal Stainless & Alloy Products, Inc. (NASDAQ:USAP) announced a base price increase of 7% to 12% on bar products. The increase went into effect immediately. Present material and energy surcharges will remain in effect.
Like United States Steel Corporation (NYSE:X), Nucor Corporation (NYSE:NUE), and Cleveland-Cliffs Inc. (NYSE:CLF), Universal Stainless & Alloy Products, Inc. (NASDAQ:USAP) is one of the best steel stocks to invest in.
Number of Hedge Fund Holders: 12
Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) was founded in 1906 and is headquartered in Portland, Oregon. The company recycles ferrous and nonferrous metal, and manufactures finished steel products worldwide. Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) also acquires, processes, and recycles salvaged vehicles, rail cars, home appliances, industrial machinery, manufacturing scrap, and construction and demolition materials.
On October 24, Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) reported a FQ4 non-GAAP EPS of $0.50 and a revenue of $894.41 million, outperforming Wall Street consensus by $0.04 and $76.81 million, respectively. Revenue over the period climbed 5.8% on a year-over-year basis.
Goldman Sachs analyst Emily Chieng on October 6 maintained a Buy rating on Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) but lowered the firm's price target on the shares to $39 from $45. While soft market conditions are resulting in price and demand weakness in the ferrous scrap markets, the longer-term fundamentals for scrap remain attractive, due to structural shifts from blast furnaces to electric arc furnaces, the analyst told investors in a research note.
According to the third quarter database of Insider Monkey, 12 hedge funds were bullish on Schnitzer Steel Industries, Inc. (NASDAQ:SCHN), with collective stakes worth $26.2 million. Eric Sprott’s Sprott Asset Management is the leading position holder in the company, with 264,600 shares valued at $7.5 million.
Number of Hedge Fund Holders: 14
Worthington Industries, Inc. (NYSE:WOR) is an industrial manufacturing company that specializes in value-added steel processing, manufactured consumer, building, and sustainable mobility products in North America and internationally. It operates through Steel Processing, Consumer Products, Building Products, and Sustainable Energy Solutions segments. Worthington Industries, Inc. (NYSE:WOR) is one of the best steel stocks to buy now.
BMO Capital analyst Katja Jancic on September 30 maintained a Market Perform rating on Worthington Industries, Inc. (NYSE:WOR) and lowered the price target on the shares to $52 from $58 after its Q1 results. In the short-term, Worthington Industries, Inc. (NYSE:WOR) is facing headwinds given a sharp decline in steel prices and inflationary challenges, but over the longer-term, Worthington Industries, Inc. (NYSE:WOR)’s plan to split into two does offer the chance to unlock value, the analyst told investors in a research note. The analyst added however that the near-term headwinds and the higher likelihood of a more conservative capital allocation strategy warrant a neutral stance.
According to Insider Monkey’s data, 14 hedge funds were long Worthington Industries, Inc. (NYSE:WOR) at the end of the third quarter of 2022, with collective stakes worth $23.50 million. Ken Griffin’s Citadel Investment Group held the largest position in the company, with 119,894 shares worth $4.5 million.
Number of Hedge Fund Holders: 20
BHP Group Limited (NYSE:BHP) was established in 1851 and is headquartered in Melbourne, Australia. It operates as a resources company in Australia, Europe, China, Japan, India, South Korea, the rest of Asia, North America, South America, and internationally. BHP Group Limited (NYSE:BHP) has three segments – Copper, Iron Ore, and Coal. It engages in the mining of copper, silver, zinc, molybdenum, uranium, gold, iron ore, and metallurgical and energy coal. Metallurgical coal is a key component in the steel-making process.
On November 23, BofA analyst James Redfern upgraded BHP Group Limited (NYSE:BHP) to Buy from Neutral with a price target of A$47.50, up from A$45, stating that his higher target primarily reflects a more optimistic view on copper.
According to Insider Monkey’s Q3 data, 20 hedge funds were bullish on BHP Group Limited (NYSE:BHP), compared to 19 funds in the prior quarter. Ken Fisher’s Fisher Asset Management is the biggest position holder in the company, with 17.6 million shares worth $881.2 million.
In its Q1 2021 investor letter, Harding Loevner, an asset management firm, highlighted a few stocks and BHP Group Ltd. (NYSE:BHP) was one of them. Here is what the fund said:
“Our purchase of Australian mining company BHP Group Ltd. (NYSE:BHP) is an example of a quality company at a moderate valuation that should deliver attractive long-term returns. We believe the market has undervalued its enduring competitive advantage due to its low cost iron and copper mining operations which has allowed the company to deliver consistent profits and cash flows across the inevitable ups and downs of the global metals cycle. While the variability of commodity prices prevents BHP from scoring in the top ranks of measured quality, we are willing to bear some of that uncertainty in return for a more attractive valuation given the company’s strong business fundamentals.”
Number of Hedge Fund Holders: 20
Commercial Metals Company (NYSE:CMC) is a Texas-based company that manufactures, recycles, and fabricates steel and metal products in the United States, Poland, China, and internationally. The company processes and sells ferrous and nonferrous scrap metals to steel mills and foundries, aluminum sheet manufacturers, brass and bronze ingot makers, copper refineries and mills, specialty steel mills, high temperature alloy manufacturers, and other consumers. Commercial Metals Company (NYSE:CMC) is one of the premier steel stocks to monitor.
On October 13, Commercial Metals Company (NYSE:CMC) posted a FQ4 non-GAAP EPS of $2.45 and a revenue of $2.4 billion, outperforming Wall Street estimates by $0.22 and $40 million, respectively. Revenue over the period jumped 18.2% on a year-over-year basis.
BMO Capital analyst David Gagliano on October 14 raised the price target on Commercial Metals Company (NYSE:CMC) to $43 from $37 but kept a Market Perform rating on the shares after its FQ4 earnings beat. Macro headwinds are starting to weigh on the company's overall results and short-term outlook, but Commercial Metals Company (NYSE:CMC) is positioned to deliver relatively strong results, as ongoing stability in the American construction pipeline and backlog mitigate the headwinds in its Poland operations, the analyst told investors in a research note.
According to Insider Monkey’s Q3 data, 20 hedge funds were bullish on Commercial Metals Company (NYSE:CMC), compared to 23 funds in the prior quarter. Bruce Berkowitz’s Fairholme (FAIRX) held the largest stake in the company, with 2.3 million shares worth $84.3 million.
Here is what Fairholme Capital Management specifically said about Commercial Metals Company (NYSE:CMC) in its Q2 2022 investor letter:
“Commercial Metals Company (NYSE:CMC) recycles scrap into rebar essential for the strengthening of concrete found everywhere. CMC is priced at five times estimated earnings and pays a 1.6% dividend that I expect to grow with profits. To better understand the Fund’s recent infrastructure investments, I recommend Vaclav Smil’s How the World Really Works.”
Number of Hedge Fund Holders: 26
Rio Tinto Group (NYSE:RIO) is a London-based company engaged in exploring, mining, and processing mineral resources worldwide. The company offers aluminum, copper, diamonds, gold, borates, titanium dioxide, salt, iron ore, and lithium. Customers use Rio Tinto Group (NYSE:RIO)’s iron ore to produce steel.
On November 30, investment advisory Jefferies added Rio Tinto Group (NYSE:RIO) to the firm's "Franchise Picks" list, which represents a selection of the "most differentiated calls in liquid stocks." Rio Tinto Group (NYSE:RIO) is well positioned to benefit from a rebound in Chinese economic growth, including stability in China's troubled property markets, noted the firm, while keeping a Buy rating and 6,700 GBp price target on Rio Tinto Group (NYSE:RIO) shares.
According to Insider Monkey’s data, Rio Tinto Group (NYSE:RIO) was part of 26 hedge fund portfolios at the end of Q3 2022, compared to 24 in the preceding quarter. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital is a prominent position holder in the company, with approximately 6 million shares worth $326.6 million.
In addition to United States Steel Corporation (NYSE:X), Nucor Corporation (NYSE:NUE), and Cleveland-Cliffs Inc. (NYSE:CLF), Rio Tinto Group (NYSE:RIO) is one of the steel stocks favored by elite investors.
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Disclosure: None. 11 Best Steel Stocks To Buy Today is originally published on Insider Monkey.
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