$40.66
0.54 (+1.35%)
ArcelorMittal (ADR) (MT)
CAPS Rating:
The Company is a global steel producer. It produces a range of high-quality finished and semi-finished carbon steel products including sheet and plate, long products, including bars, rods and structural shapes, and stainless steel products.
RSS Headlines
Fool UK
Recs
Steel has been absolutely battered lately. This was trading at over $100 in early Summer '08 and now it has dipped all the way down to the $20 range. While worldwide recession and a possible depression will probably lower demand for steel some, I think the market has gone way overboard on this. There will still be a lot of infrastructure building in places like China in the near future that will demand steel. Long-term, steel might still have moderately bullish prospects.
The book value of this stock is $45 and it's selling at over a 50% discount to that! All the while, it's still producing positive cash flows; for FY '07, I calculated about $11.50 per share in cash flows from operations and maybe $8 in free cash flows (depends on how you calculate it; but needless to say, it's positive). Will that drop over the next year? Probably, but even if it drops a considerable amount this might not be such a horrible deal. At the current share price, it's almost like 3 straight years of huge losses are factored in.
I think if you want to buy into steel, now is the time to do it. I'm sure there is still some downside risk left, but I'm just not sure how much further a stock like this can get discounted when it's already trading at half its book value.
Careful - 28 BILLION in long term debt is nothing to sneeze at. It's alarmingly close to 100% market cap!While I do agree that this sector was probably overbought (and is now oversold), I don't think I'd buy this in my real portfolio. Instead, I'd look to BHP for a basic materials play, because it is more diversified and has significantly less debt.Fool on!
Adventureneil, BHP is probably a good bet, but I actually prefer to keep away from large caps. I'd rather to buy into companies that specialize in one particular area since that makes it easier to analyze their financials. You're right; MT's long-term debt is nothing to sneeze at, but if one wanted to buy into steel in real life, dividing one's holdings up between X, NUE, and MT would help mitigate risk. Personally, if I had to bet, I think all three will be alright, but the risk is there.