I can’t believe it’s been two months since my last post. I have been busy with the holidays and other stuff. But the 5% drop in the stock market brought me back to writing again. I just wanted to update everyone what we have been up to lately in terms of our stock transactions.

As I mentioned in Lowest Average Cost Wins, we had built a position in Baker Hughes Inc. (NYSE: BHI) with an average price of $26.83. In the first week of January, BHI went all the way up to $37.00. While we wanted to hold BHI we needed cash so we sold all of it at $34.50 for a cool 28% return. We also sold Nucor Corporation (NYSE: NUE) for a 20% return.

With the money raised from BHI, we bought AK Steel Holding Corp (NYSE: AKS). According to its profile on yahoo finance,  it manufactures flat-rolled carbon steels, including coated, cold-rolled, and hot-rolled products; and specialty stainless and electrical steels that are sold in slab, hot band, and sheet and strip forms.

AKS Valuation (balance sheet as of 12-31-2008 from google finance)

As you can see, working capital alone should be worth $11.49 per share. At any price below $11.49, you are buying $1 cash (or cash equivalent) of AKS for under a dollar and not paying any premium for their business! We thought that was a huge discount and started building our position at $11.90. We kept averaging down and just today added 200 more at $8.45. All of the steel companies were beaten up this year, and we couldn’t resist U.S Steel either (NYSE: X). We bought some at $29. Now we are heavily invested in steel, not ideal but they are a bargain right now!

Oil and Gas equipment and service is another sector we are heavily into. As January progressed, BHI started to come back down, and knowing it was a good company, we bought again at $29.75. We also decided to buy some SPDR S&P Oil & Gas Equipment & Services (XES) at $17.50. It’s an ETF that holds Oil equipement and service companies such as BHI, Weatherfod International and Schlumberger Ltd.

Here is what we currently hold and our average Price: