Nucor Excels On Costs And Is Using Its Efficiency As A Strategic Weapon

 I turned bullish on Nucor (NUE) a quarter ago, largely on what I saw as a bottoming outlook/sentiment for steel and a relatively good valuation. At the same time, I preferred names like Steel Dynamics (STLD), Commercial Metals (CMC), and Ternium (TX), and while Nucor has done okay since that last piece, those names have done even better (CMC, in particular). I would say sentiment has marginally improved, as steel has gone from being disliked to largely ignored/overlooked.

Nucor remains a first-rate operator, and I don't prefer other names because I think Nucor is intrinsically inferior. In fact, I like the company's ongoing strategic investment policy of using cost and efficiency advantages to gain long-term share in select market categories. I just still see more upside in other names, and I'd note that while I do think steel should start to turn, Nucor isn't necessarily the best call - paradoxical as it may sound, inferior companies often outperform better companies in those upturns. So, I still think Nucor is a name you can buy here to play a rebound off the bottom, but I don't expect that it will be the best-performing name of the group.

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Nucor Excels On Costs And Is Using Its Efficiency As A Strategic Weapon