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Pittsburgh-based U.S. Steel is an integrated steel producer, running steel mills, making steel products, and selling steel to carmakers, builders, and others who need steel.
Any time I see a good company with positive cash flows selling at a significant discount to book value, I want to give the thumbs-up. As of their last quarterly filing (ending Sep 30, 2008), US Steel's book value was $49.91 per share. Despite the recessionary environment, they had (diluted) earnings of $7.79 per share. They don't report quarterly cash flows unfortunately, but for the past nine months, they had cash flows from operations equal to roughly $11 per share and free cash flows around $5.80 per share. While debt-to-value is a little higher than I'd like to see at 63.3%, I do not think they will have too many difficulties. Current ratio is healthy at 1.89. Quick ratio is 1.06, which should be quite healthy when you take into account their positive cash flows. Beyond the financials, I like the outlook for steel. The market is overreacting to the recession, as I think there will be a lot of infrastructure building in China and the US regardless. Undoubtedly, X's earnings and CFOs will probably drop as steel prices have fallen, but there will still be a lot of demand and given the fact that the stock is selling at roughly half its book value as I write this (under $25), it's like the market has already factored in several years of heavy losses into the price. Six months ago, everyone was high on steel but the stock prices were inflated --- now is the time to buy in. I'm also thumbs-up on NUE and MT.
Not to mention it hadn't traded in the 20's since the 90's, as I sit here today on the last day of a excellent year for equities, I have seen one of the largest and oldest companies of America originally owned by carnegie rally 38% in the last three weeks..I agree you can't really go wrong with a company that has cash basis equal to about 15 when your purchasing at 20....
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