Could U.S. Steel Be a Good Buy Right Now?

With stocks like Facebook and Tesla plummeting, investors may be looking for a different class of investment. Perhaps it’s time to go with something a bit more…traditional.

Initially founded in 1901, the U.S. Steel company is the 24th largest producer of steel across the globe and the 2nd largest domestic steel producer. With nearly 30,000 employees across the nation, U.S. Steel has been a solid, stable company for some time.

Investing in Domestic Steel
First: the steel industry. Steel has been doing extremely well under the guidance of the Trump administration, which shouldn’t be a surprise: it was a major campaign point during the elections. Though domestic steel production has flagged somewhat in recent years, a combination of external tariffs and internal support has made domestic steel companies stronger than ever.

Steel companies have been ramping up their production, and though it remains to be seen what effect it will have on employees, it’s undeniable that the industry itself is going to be growing. Trade tariffs have made it prohibitively expensive to bring steel in from external sources, and consequently has made it so that many businesses are now sourcing domestic steel rather than purchasing internationally. This has created a level of artificial scarcity, which may further drive the price of steel up.

All of this means that the steel industry is going to grow, and investors should be mindful of this growth. However, this growth is extremely related to the trade tariffs, and should be treated as such: if the tariffs go away, it remains possible that steel prices could plummet. Ideally, the hope is that domestic steel manufacturers will be able to improve upon their profitability and reach within that time, gaining a firmer foothold on the market.

Internationally, it should be noted that competing and retaliatory tariffs could make it more difficult to sell steel internationally.

The Benefits of Investing in U.S. Steel
U.S. Steel is not the largest producer of domestic steel in the United States, but there are some benefits to that. U.S. Steel has traditionally lagged behind other steel companies in terms of valuation due to a few issues with the company itself, and this has led to a cheap stock that potentially has room for growth.

U.S. Steel uses a more expensive manufacturing process for steel that other large steel refineries. Not only does this significantly reduce their revenue but also their flexibility; the processes that their competitors use can be used on a wider variety of metals such as scraps. This lack of technological innovation has held U.S. Steel back in the past.

However, recent months have shown U.S. Steel to be dramatically improving its revenue, and with the industry as a whole poised for growth, U.S. Steel may finally have a chance to modernize and become competitive once again. Internally, there have been a number of initiatives within the company that have yielded positive results, and the company’s stock has been rising. Of course, a measure of this stock improvement is due to the trade tariffs, but recent days have seen its stock rising while larger steel companies have fallen; the company has more room for growth.

Is U.S. Steel a good buy? If you’re an investor who is interested in getting into the domestic steel production, U.S. Steel is a historically affordable stock that has seen recent growth. Not only is the demand for steel likely to soar in the coming years, but the company itself appears to be attempting to revamp and improve itself related to the competition. With over a hundred hears of history, it’s a stable company that is one of America’s largest private employers.

At the same time, rather than being undervalued, U S. Steel has been held back in the past largely due to its own fundamentals and a lack of innovation; if it cannot properly tackle these issues, it may not do well after the short-term effects of the trade tariffs have waned.

Regards,

Ethan Warrick
Editor
Wealth Authority

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