GrafTech International Ltd. (GTI)

Overvalued and frankly not very good, but will increase with the gold bubble. Be careful in December and January (and even now).

This is one of my few industrial sector picks but I believe that it when the steel industry recovers they will move up sharply. More importantly, Mario Gabelli thinks so too.

Technology needed to produce basic commodity

See pitch by devoish.

Razor blades

You should take a long position on Graftech to benefit from the market’s shortsighted view of steel manufacturing, industrialization, and a misunderstanding of Graftech’s potential contribution to alternative energy production.

Graftech will meet the needs of world industrialization: Due to higher marginal utility of capital and population growth patterns, emerging markets will industrialize in the mid-to long run. Industrialization requires steel. Steel production takes place in Electric Arc Furnaces (EAFs) that must continually use great amounts of graphite electrodes to regulate heat and electric flow. These electrodes deplete and must be replaced. Graphtech has an 80 country-wide electrode distribution network, the expertise, and the productive capacity to dominate in growing markets. Using current spot prices for Graphite Electrodes combined with

Graftech’s annual manufacturing capacity of 220,000 metric tons, Graftech could feasibly double its 2008 revenue with no capacity constraints that would lower its 27% operating margins.

Graftech has internationally diversified revenue streams: Graftech does not get more than 10% of its operating revenue from any one country. It has 20% of the total world market share, and established distribution networks and intellectual property that prohibit competition. The company has little credit exposure, and its diverse revenue streams shield it from exchange and interest rate risk.

Graphtech will dominate multiple worst case scenarios: Trading at $12.22, down over $15 from its 52 week peak of $27.21 a share, Graftech is priced assuming that it will not capture new markets, and that durable demand will be permanently impaired. The belief that steel production will remain stagnant is extremely short-sighted because delayed capital overhauls and industrialization together must eventually cause steel production to surge above previous 8% annual growth levels. Graftech’s international presence will allow it to supply the steel producers that profit from the inevitable industrial overhaul. Additionally,
Graftech’s polysilicon production, ingot processing, and high temperature processing knowledge provide necessary heat control for both solar and nuclear technology.

Graftech’s financial, strategic, and operational positioning minimizes its risk while exposing it to huge upside potential.

"pick and shovel" type of business selling required equipment for electric arc furnaces, solar, transportation industries. Strange thing going on here, they seem to be using earnings to pay down debt. I guess they have to make money to do that. One more outperform.

favs

bet on decreased builder steel inventory and higher orders placed in the near future.

Duh....look at the trend. If profit margins plummit, you can bet the euro sector will climb all over this op. Only a fool will pass this by.

Tied to commodities but the third world is going to help this one outperform.

Member of real Motley Fool portfolio.

Demand for their products will increase due to changes in the steel industry

Advanced materials are a primary direction for increased efficiency in transportation.

GTI seems inexpensive with a PEG value of 0.6036, below the Electronic Instr. & Controls industry median PEG of 0.94, which is supported by a PE of 6.0362 that is also below the industry median of 11.99. GTI is one of the more profitable companies in the Electronic Instr. & Controls industry with a net margin of 17.42%. Its operating margin and net margin are among the strongest of any peer while its gross margin is above the industry median. GTI is consistently one of the most efficient companies in the Electronic Instr. & Controls industry. With a Return on Assets, Revenues Per Employee, and Return on Equity of 21.21%, $412,056.60, and 53.36% respectively, they are among the most effective companies in the industry. GTI's debt to total capital ratio, at 13.47%, is in-line with the Electronic Instr. & Controls industry's norm. The company's Quick ratio has a value of 0.6 which shows that there are not enough liquid assets to satisfy current liabilities in the event that operating earnings are unable to.

In addition to the above info courtesy of TDAmeritrades research features, I also utilize Fibonacci retracement along with PSAR, MFI and MACD and volume to gauge when and by how much a stock will "rebound" or "retrace". IMHO GTI looks like it hit its bottom at 3.55 on 11/20/08 from it's peak of 27.98 on 7/2/08, is slowly rebounding. The first Fib point (33%) in my "rough calculations" is 11.69, which it is close to reaching at this point. Would have loved to have caught this one around 4 - 4.5, still plenty of room for a nice profit in the long term even at 50% retracement of 15.77, although 68% retracement of 20.16 would be even nicer. Only thing that I wish I could have with this pick is enough liquid assets to cover it's current liabilities.

Just a new approach to picks I am trying out.

Very solid fundamentals.

bullishbabo pick

Steel industry should be back within a year.

Great buy and hold stock. As soon as R&D picks back up, this stock will soar with developments and improvements such as carbon nanotubes.