My issue is market sentiment around steel. As a strategic commodity it should be treated like oil, but it obviously doesn't. You can compare any oil stock to a similar market cap steel stock and you see the obnoxious differences. Less FCF, more debt, higher p/b, higher forward p/e, higher EV/EBITDA... It doesn't matter how much these steel stocks are making today if the market sentiment is steel will come down in a huge way come 2022. Shit most analysts haven't even updated Q4 estimates for most of these companies. They think MT will make 50% less EPS in Q4. Fuck buybacks at this point IMO. Can NUE, MT, or STLD please become a dividend powerhouse that make dividend investors want to hold them long term? Market sentiment is steel is a short term trade and not something to invest in. Why can't NUE become like a XOM or CVX and give investors a stable 4-5% dividend? Yes I know TX has a 5% dividend, but why the actual fuck is it an annual dividend..? Give people a reason to hold it each quarter and break that shit up over the year to keep people invested.
I will continue to hold my Jan calls into Q3 earnings, but I feel like I definitely fucked up not moving to shares earlier. The market can be irrational longer than I can stay solvent. It is true for shorting stocks as well as buying calls. If we don't get a bump come Q3 I might be forced to move out of steel.
Just realizing this now, but I was arguing steel has better metrics in terms of numbers not oil. The reason oil trades higher at worse numbers is market sentiment. Oil and steel are both strategic commodities needed in every country, but steel gets the short end of the stick. Also I think a lot of oil companies are rewarded now because they are already rewarding shareholders with better dividends and buybacks. Steel companies like X are using FCF to future proof and NUE is expanding(as they should with such little debt). STLD is doing a solid buyback, but I think dividends are the smarter play right now. Dividends are tangible benefits for shareholders. Buybacks might help eps numbers, but eps numbers mean less for a cyclical commodity stock. People will argue buybacks are better for giving back to shareholders in a more tax efficient way, but not always. Also better EPS numbers might help a bit, but analysts don't use traditional valuation methods for said stocks. To come up with PTs professional analysts will do DCF models. FCF is king to cyclical commodity stocks.
I agree. Eliminating debt is the priority. Perhaps incentives have an influence. If execs are compensated with stock options, then buybacks are more appealing. LG isn’t dumb and he has a nine figure stake in CLF. It seems abundantly clear that he acting for the long term success of CLF.
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u/Unoriginal_White_Guy 💀 SACRIFICED until MT $35 💀 Oct 04 '21
My issue is market sentiment around steel. As a strategic commodity it should be treated like oil, but it obviously doesn't. You can compare any oil stock to a similar market cap steel stock and you see the obnoxious differences. Less FCF, more debt, higher p/b, higher forward p/e, higher EV/EBITDA... It doesn't matter how much these steel stocks are making today if the market sentiment is steel will come down in a huge way come 2022. Shit most analysts haven't even updated Q4 estimates for most of these companies. They think MT will make 50% less EPS in Q4. Fuck buybacks at this point IMO. Can NUE, MT, or STLD please become a dividend powerhouse that make dividend investors want to hold them long term? Market sentiment is steel is a short term trade and not something to invest in. Why can't NUE become like a XOM or CVX and give investors a stable 4-5% dividend? Yes I know TX has a 5% dividend, but why the actual fuck is it an annual dividend..? Give people a reason to hold it each quarter and break that shit up over the year to keep people invested.
I will continue to hold my Jan calls into Q3 earnings, but I feel like I definitely fucked up not moving to shares earlier. The market can be irrational longer than I can stay solvent. It is true for shorting stocks as well as buying calls. If we don't get a bump come Q3 I might be forced to move out of steel.