In the days before COVID-19, I liked Commercial Metals (CMC) as a mispriced steel asset leveraged to better underlying pricing power, a still-healthy non-residential construction market, and ongoing self-help potential as the company continued to leverage production and distribution optimization opportunities. While the stock outperformed its steel peers for most of 2020, it underperformed the S&P 500, and recently, Steel Dynamics (STLD) and Cleveland-Cliffs (CLF) have pulled ahead in terms of returns since that prior article.
Although the valuation still looks out of whack, it’s harder to recommend Commercial Metals when the outlook for non-residential construction is deteriorating. A federal infrastructure stimulus bill would be a big help, but that is most likely a 2021 event (if then...), and I’m concerned that pricing could be weaker on softer demand. I do see this as one of the more interesting price/value opportunities, but those macro worries do hold back some of my enthusiasm.
Read the full article here:
Macro Issues Loom Over Commercial Metals' Ongoing Self-Help Story
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