The steel industry is certainly one to watch this year thanks to the possibility of huge amounts of infrastructure spending and a widespread rebound in economic activity. While steel stocks were big underperformers for the majority of 2020 thanks to the pandemic, things have changed quickly regarding the overall perception of the industry. With demand for the metal picking up and steel hitting its highest prices since December 2020, there are plenty of reasons to be excited about companies involved in the manufacturing and production of this important material.
When you stop to consider all of the different applications for this metal, it’s easy to recognize the potential from an investment standpoint. Steel is used in buildings, infrastructure, tools, trains, ships, machines, cars, electrical appliances, and more thanks to its high tensile strength and low cost. With manufacturing activity on the rise and the World Steel Association predicting that global steel demand will rise 4.1% in 2021, it might pay off to add some of the strongest steel stocks to your portfolio. Let’s take an in-depth look at 3 rock-solid steel stocks to buy now
First on our list is one of the largest steel producers and one of the largest metal recyclers in the United States, Steel Dynamics. With a differentiated business model that involves using electric arc furnaces to create steel, it’s a very intriguing option for investors to consider. These electric arc furnaces are interesting because unlike traditional blast furnaces, they can be rapidly started and stopped which allows the steel mill to vary its production according to demand. They offer efficiency, flexibility, and are capable of producing the full range of steel grades with low capital outlay, which is a strength for Steel Dynamics.
This company generates revenue from manufacturing and selling steel products, processing and selling recycled metals, and fabricating and selling steel joist and deck products. Steel Dynamics also recently announced that it is boosting its quarterly dividend by 4% to $0.26 per share. The stock offers a 2.13% dividend yield at this time and its price has risen over 10% in March thus far. It’s a steel company that has a leading market position and should benefit from any increases in automobile, heavy equipment, and construction demand throughout 2021, which is why it’s one of the best options in the industry at this time.
U.S. Steel Corp (NYSE:X)
U.S. Steel is a company with a lot of history that is worth a look for several reasons at this time. The company’s CEO, David Burritt, recently stated that he is bullish on U.S. Steel’s prospects given the possibility for an “economic supercycle” thanks to all of the cash and liquidity being provided by the Federal Reserve. When you consider things like the infrastructure bill, inflationary pressures, and surging demand in energy, it’s easy to find reasons to agree with him.
U.S. Steel is an integrated steel producer that has a manufacturing capacity of more than 22 million tons at plants in North America and Eastern Europe. It’s fair to assume that they are going to fire up their blast furnaces in a big way this year to produce both flat-rolled and tubular steel products. The recent acquisition of Big River Steel for $774 million could be a move that pays off in a big way, as it adds the aforementioned electric arc furnace to its business model. The company’s “Best of Both” strategy is also intriguing and should help to drive growth while adding sustainable technology into the mix. U.S. Steel stock is up 30% year-to-date and has plenty of upside given that its 10-year high is $44.88.
Reliance Steel & Aluminum Co (NYSE:RS)
If you’re looking for one of the hottest steel stocks in the market at this time, look no further than Reliance Steel & Aluminum. It’s the largest metals service center company in North America and provides materials management and metals processing services to over 125,000 customers. If you aren’t familiar with metals services centers, they essentially acquire primary products like carbon steel, aluminum, stainless steel, copper, and more from metals producers and then process them to meet the unique specifications of their customers.
While the stock is a bit stretched given that it has rallied over 26% since February, investors that are interested in owning a quality name in metals & mining should consider adding shares on pullbacks. It’s an interesting option because the company plays a key role in so many different industries due to its diverse customer list which includes end markets like construction, automotive, heavy industry, semiconductors, aerospace defense, and energy. Reliance Steel also recently boosted its quarterly dividend payout by 10% to $0.6875 per share and should see its volumes pick up throughout 2021, making it a fine option for any investor interested in steel stocks.
Before you consider United States Steel, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and United States Steel wasn't on the list.
While United States Steel currently has a "Hold" rating among analysts, top-rated analysts believe these five stocks are better buys.
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