US Steel - a cyclical opportunity

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I am a long-term value investor holding onto companies for 6 to 8 years. So when I analyse companies I look at their long-term performance.

In the context of cyclical companies, this mean looking at the performance over the cycle. A good example is US steel. This is a company whose revenue is strongly correlated to the steel price movement as illustrated below.

[Image: US-Steel.png]

The trick is then to enter when the market price is trading below its fundamental value based on its cyclical performance. Then sell when the market price goes above the cycle value.

So it boils down to determining the value over the cycle. In the case of US Steel, there is further complication as its performance is not only dependent on the cyclical steel prices, but also its shipment volume.

To handle this, I developed a financial model that took into account both factors. Based on this model, I found that there is no margin of safety at the current price.

Of course, this is an overview. If you are a fundamental investor, I am sure you want to dig deeper. If you want to know more about the company, have a look at my article 
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