As I mentioned in my Value analysis post, Nucor is one of the company that looked good for a defensive investor. The market condition has changed so much since November, but Nucor still looks good based on the analysis with their latest financial statements. Therefore, we kept following it and on March 2nd, it was trading around $31. We did not have any money to invest, but since it was trading so low, we decided utilize the margin capability of our account. We usually don’t use margin, and especially in this volatile times, we should not have even thought about it (that is not the Grahams’s way). But we bought NUE at $30.80 anyways, talk about impulse buying…on credit! Here is a price chart for NUE since Nov. 2008.
Nue chart" src="http://www.wiftsinvestment.com/wp-content/uploads/2009/03/picture-1.jpg" alt="Nue chart" width="500" height="250" />
Luckily for us, NUE kept going up since then and earlier today it was trading at around $37. Already over-exposed to steel, any more of it was risky enough, let alone more steel on margin. So we sold all of NUE at $37, a gain of 20% after commission. In today’s bear market conditions, any additional cash is good.
With some cash on hand, we can fish for more value. Perhaps NUE will come down to 30 again or we will find something different. We will be posting our next move so keep checking.
What do you think of our move? We’d like to hear from you. Feel free to comment and get a discussion going.
4 Comments until now.
Bravo! It pays to be bold and well-researched, doesn’t it?
Funny that as I am typing this (pre-market, 9.10 am, mar 17), I can see steel stocks tanking because NUE just revised its guidance from estimated positive 43 cents to negative 55 to 65 cents.
Great timing your in and out!
Good luck.
-SK
The timing was more of a luck. But it is good to be lucky for a change!
NUE is down 12% today, but it is still above what we’d paid. Even with the revised guidance of loss, if it comes below $30 it’s a good buy. What do you think? Among all the steel companies, NUE is in a strong position financially.
So NUE revised guidance doesn’t seem to have affected it too much. Since the Tuesday the 17th fall, NUE is up about 21%, it’s trading around $38 something. Does this reflect NUE’s superior financial position? Iron and Steel is up about 4% today (right now). Is it because people are feeling more confident or is there something solid in NUE/steel.
btw, X and AKS up ~10% as well.
Thoughts?
Save the tuesday’s decline, the horrible guidance surely did not bite. Similar story with X which, although downgraded pre-market to a target price of $11 by BAC/Merrill, flew 10% that same day. If that’s weird and irrational, I am not surprised. This is an irrational market. Should we be too surprised if an irrational market becomes even more irrational?
There is chatter that steel and other metal stocks are rallying solely on the news over chinese and american stimulus spending. If that’s right, this rally is founded on the shifting sand of the expectation that those spending will work. Any sign of failure and the poor guidance and downgrades might come back to haunt NUE and X. Until then, I’d imagine it will be fun riding the ride.
Comment!