Wednesday, September 17, 2014

Seeking Alpha: Brazil's Malaise Drags Gerdau Down

I thought that Brazilian steel producers like Gerdau (NYSE:GGB) were beaten down badly enough earlier this year that they'd be better stocks for the remainder of the year. That was a big mistake, as the struggles of Brazil's economy have only gotten worse. With new construction activity slowing down and auto production down by double-digits, Chinese imports on the increase, and domestic prices weakening, Gerdau shares have fallen another 15% since that March piece.

Stubbornness can become very expensive in investing, but I do think Gerdau can do better. I don't see that improvement as being too likely this year though, and the company's North American operations aren't big enough to outweigh the weak results in Brazil. There's no reason to own Gerdau if you think 2014 results are more or less the "new normal", but if construction and industrial production recover after Brazil's election, Gerdau could be a prime beneficiary.

Read more here:
Brazil's Malaise Drags Gerdau Down

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