Opinions

Matt Kacur United States Steel X-N DON'T BUY Mar 13, 2017

Trump has said they will be using US steel for future pipeline projects. Don’t use political comments as your only criteria. You may have missed the pop on this. ROC is actually negative now. Even putting in improvement to a normalized level, or even an above average level, he doesn’t think the price of the stock can be justified.

Matt Kacur

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$35.780

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COMMENT

Following the gap a number of weeks ago, this continued to decline, which is not what you want to see. The chart has shown a head and shoulders pattern. This is the type of thing that he tries to avoid.

COMMENT

This is very whippy, and he wouldn’t want you to be overly focused and concentrated in such an idiosyncratic name. Steel names are not his favourite. The chart indicates it has been very challenged. Fundamentally, they have had some earnings misses and are more often missing then they are hitting. There are much greener pastures elsewhere.

BUY

CEO optimism has been rising in the U.S. The steel sector and this stock are doing well. In fact, this is one of the leading sectors in America. Certainly take a look at this.

SELL

He has no idea to assess Trump and his macro plans. It's a political nightmare. Sell. A tariff would lift US steel stocks, but demand for US products will also drop. Be prudent and let this stock go.

DON'T BUY

The problem with steel right now is global over supply. He is short the SLX-N, a US steel ETF. This industry is cyclical and we have seen the cyclical peak. The US$ might roll over and that would help

WEAK BUY

It's fallen because lots of people believe in the inverted yield curve theory about the recession. Steel companies are cyclical. If you think there's still room in the cycle, which he does, the valuations are starting to look attractive. A trade deal would make stocks like this pop.

DON'T BUY

Be careful in this space with concerns of a global recession and oversupply (Chinese demand is weakening). Long-term this isn't bad, but we are heading into a downturn.

DON'T BUY

Steel has been hit hard the past month with a poor outlook. He prefers Stelco in this space. Stelco is well-run, not American and trading at a low valuation. Stelco is in great shape since emerging from bankruptcy.

DON'T BUY

Will benefit from the infrastructure program and economic reopening, so how much upside is here? The infrastructure will give you a 30% pop. He prefers peer, NUE, which doesn't need an infrastructure bill. X-N has made a comeback, but it isn't best of breed. He would look elsewhere.

COMMENT

$25 is support and could bounce off this. Sell the July $34 call, collect $1.45 and use that premium to fund your July put.

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Matt Kacur United States Steel X-N DON'T BUY Mar 13, 2017

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