Steel Dynamics Offers Value, But It's Going To Be Ugly

I wasn’t all that bullish on Steel Dynamics (STLD) back in January, but I did say it was worth another look if the price fell into the $20’s. I certainly wasn’t expecting the global Covid-19 outbreak at that point, and that makes the valuation discussion interesting. I think the steel industry is looking at a tough stretch (tougher than the CEOs seem to be expecting/projecting), but I also think Steel Dynamics is among the best-run in the group, and I think it’s better to own EAF operators than blast furnace operators during tough times.

It’s difficult to recommend a commodity stock given the severe disruptions across its most important markets, let alone the meaningful capacity growth that’s coming over the next 18 months. Still, I don’t think my expectations are that aggressive, and the shares do look undervalued. If you can handle the risk, this may be a name to consider now.

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Steel Dynamics Offers Value, But It's Going To Be Ugly