5 Cash-Rich Small Cap Stocks To Invest In

1. Algoma Steel Group Inc. (NASDAQ:ASTL)

Number of Hedge Fund Holders: 39

Algoma Steel Group Inc. (NASDAQ:ASTL) is a fully integrated steel producer based in Sault Ste. Marie, Ontario, Canada, that manufactures and sells hot and cold rolled steel products including sheet and plate for the transportation industry. On November 29, Algoma Steel Group Inc. (NASDAQ:ASTL) declared a $0.05 per share quarterly dividend, in line with previous. The dividend was paid on December 30, to shareholders of record on November 30.

On January 18, Stifel analyst Ian Gillies upgraded Algoma Steel Group Inc. (NASDAQ:ASTL) to Buy from Hold with a price target of $15.00, up from $10.75. The upgrade is based on a near-term improvement in financial performance through an increase in volumes and higher unit pricing and the long-term value creation potential from the transition to an electric arc furnace which will better align the company’s cost structure and allow for higher production.

According to Insider Monkey’s Q3 database, 39 hedge funds were long Algoma Steel Group Inc. (NASDAQ:ASTL), compared to 45 funds in the prior quarter. Jon Bauer’s Contrarian Capital is the largest stakeholder of the company, with 7.50 million shares worth $48.30 million.

Here is what Nordstern Capital has to say about Algoma Steel Group Inc. (NASDAQ:ASTL) in its Q3 2022 investor letter:

“The world is short on raw materials and energy. Nordstern Capital has increased its exposure to raw materials and energy. Recession fears may temporarily suppress demand and prices. The fundamental issue, however, is a sustainable lack of supply, caused by decade-long underinvestment. The shortages cannot be resolved in the short to medium term.

Currently suppressed stock prices offer a wonderful opportunity for our commodity businesses to buy back their own shares. For instance, Algoma Steel Group (NASDAQ:ASTL) reduced its diluted share count this year from 177 million to 111 million. Nonetheless, ASTL’s share price has come down 50%, because US HRC steel prices per ton declined in the past year from $2,000 to currently $713. Today, ASTL has $500m in net cash and a market capitalization of about $700m. The company is profitable even in the current recessionary environment. The CFO expects annual mid-cycle free cash flow generation greater than the current ASTL enterprise value. This is one illustrative example. ASTL is not alone. Many present-day commodity businesses are cash and earnings rich and can use weak stock prices for aggressive buybacks.”

You can also take a peek at 15 Largest Plastic Manufacturing Companies in the World and 14 Countries Where Official Language is English.