Are steel stocks a good investment? With the Trump administration having recently imposed tariffs on imported steel from several major producers like China and Brazil, it looks like US steel companies will see more revenue, although there are still many details regarding the tariffs to get a whole picture regarding the US domestic steel production.
The global steel market has been growing lately, with 2017 nominal and underlying growth at 7% and 2.8%, respectively, to 1.62 billion tonnes. In 2018, the demand is expected to grow further to 1.65 billion tonnes, but many analysts point out to a slowdown as China slows down on infrastructure spending. Moreover, there is the argument that tariffs will increase prices and led to companies to seek substitutes and, even though, the Trump administration has promised a $1.5 trillion infrastructure spending plan, the tariffs might impede the progress of some of the projects as they become too expensive.
Moreover, steel is a very capital intensive business, which often struggles to generate sustainable long-term returns, even though US steel makers are expected to benefit from higher prices this year, on the back of tariffs and a sharp drop in steel production in China (last year, China shut down many steel mills to cut pollution). However, there is still a lot of uncertainty regarding the long-term performance of US steel stocks.
Nevertheless, if one is considering to invest in steel stocks, then a good place to start is to look at where hedge funds invest. Hedge funds usually buy stocks with a long-term horizon in mind and do a lot of research to identify the best stocks from a particular industry. We can’t know for sure the reason why one hedge fund invests in a particular stock, but we can get a general idea if we look at the overall hedge fund sentiment.
At Insider Monkey, we follow over 600 hedge funds and other institutional investors and analyze their quarterly 13F filings to determine their collective sentiment towards nearly 4,000 companies. We use this data to identify the best small-cap stocks to include in our small-cap strategy, which we share in our premium quarterly newsletters. In addition, we have a monthly newsletter that focuses on activist funds and the best ways to imitate them. However, we can also see the hedge fund sentiment towards other companies in various other industries, such as steel.
When it comes to the hedge fund sentiment towards the steel industry, we see that smart money are not particularly fond of it. The most popular steel stock among hedge funds ranks on the 285th spot in our ranking. However, during the last three months of 2017, many steel stocks saw an increase in the number of bullish investors and in this article we are going to discuss five steel companies that saw the largest increase in popularity.