3 Gems in the Metals & Mining Space: United States Steel Corporation (X), Peabody Energy Corporation (BTU) and More

Page 1 of 2

The metals and mining industry within the basic materials sector has been receiving some favorable comments from the start of the year given some improvement in the macro-environment dynamics. This has led to some capital appreciation of players within this space.  However, I still believe that there are some players out there that haven’t realized fully from the ongoing improvement sector-related dynamics. Here are some of them:

Reliance Steel & Aluminum (NYSE:RS)Reliance Steel & Aluminum (NYSE:RS)

The stock is levered to the US recovery without direct global exposure. The company gets 95% of its revenues from the US. The company has the following characteristics that make it an attractive option among the steel players:

1)      Industry-leading size & scale,

2)      Diversified end market mix/product mix,

3)      Strong margin sustainability,

4)      Stellar track record of acquisitive growth,

5)      Adequate liquidity reserves – $800 million in revolver availability.

I have already covered this company in one of my older posts. There I mentioned that the company has one of the best product mixes to benefit from steel demand recovery in the US. It deals in carbon steel, aluminum and stainless steel. Moreover, the company is not expected to face any major raw material cost headwinds. Additionally, I believe that if/when we do get a recovery in non-residential construction, normalized EPS could be $7/share to $8/share, which implies an $84 to $96 share price based on its historical P/E multiple of 12.

United States Steel Corporation (NYSE:X)

There are a number of compelling industry and company specific data points that suggest that 4Q will prove the earnings trough, with an expected steel price recovery pushing the shares higher over the next three months given that:

1) The company is highly levered to steel prices, autos in particular, which are expected to continue to improve in the coming months. The company gets 30% of its revenues from the auto sector.

2) A reversal in rig counts is expected, which sets the stage for a potential OCTG demand recovery in 2H’13. The Oil Country Tubular Goods are pipe and tube products used in the petroleum industry. The sell-side claims that the rig count will see the bottom by the end of the first half of this year.

3) Seasonality remains supportive.

Peabody Energy Corporation (NYSE:BTU)

Peabody remains the top pick in the coal sector, given its:

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Biggest Airports in the World

The 5 Most Gang Infested Cities In America

The 34 Smartest Countries in the World

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!