Investors warmed up to the idea of upcoming recoveries in many industrial markets in the second quarter, but that love didn't extend to the steel sector to nearly the same extent, even though mining companies like Rio Tinto (RIO) and BHP (BHP) have done quite well. I think there are valid reasons for this (overcapacity, weak pricing power, input cost pressures, et al), but I do think sentiment should start to bottom out relatively soon.
I had mixed feelings about POSCO (PKX) after the first quarter. I think this is a pretty good steel company, and the shares looked considerably undervalued. Still, I was worried about that sentiment issue. Since then, POSCO has done better than most other steel companies (including ArcelorMittal (MT)), but not as well as the S&P 500, and certainly not as well as the miners. At this point, I like the prospects for meaningfully better financial results in 2021 and 2022, and I don't think that's reflected in the share price. This will never be a buy-and-hold call, but I think this is a time to consider the name as cyclical rebound story.
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COVID-19 Pushes POSCO's Steel Business Into The Red, But A Cyclical Bounce Will Come
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