Best Steel Stocks to Fortify Your Portfolio
Steel stocks are among the class of investments that become more popular when fears of inflation increase. And these stocks are perhaps even more popular right now, as shortages have put upward pressure on the price of steel. As steel remains an important material in buildings, bridges and cars, demand remains strong despite persistent shortages.
This translates into an opportunity for investors. While steel is considered a commodity, it requires intense processes to produce, so there are a small number of companies that set themselves apart among steel stocks. We’ll take a look at some of the best steel stocks to buy if you want to take advantage of what could be a mini-boom for steel investment.
Steel Stocks to Buy
Here are the steel stocks to buy right now:
- Nucor Corp. (NYSE: NUE)
- Steel Dynamics Inc. (Nasdaq: STLD)
- Cleveland-Cliffs Inc. (NYSE: CLF)
- United States Steel Corp. (NYSE: X)
- Ryerson Holding Corp. (NYSE: RYI)
No. 5 Nucor Corp.
Although Nucor’s name refers to its mid-20th century attempt to enter the nuclear power industry, its business model today centers around the production of steel and related products. Nucor is based in Charlotte, North Carolina and its roots date back to 1904. Today, the company produces many steel and related products, including merchant bar, beam, sheet, plate in addition to cold finish, joists, decking and plenty more.
Nucor stock has fared fairly well lately with a 1-year return of 11%. It has a market cap of nearly $28 billion and the stock pays a dividend of about 1.9%. The stock is undervalued, and for the past two quarters, Nucor has posted revenue of about $10 billion. Despite this, analysts recommend holding the stock right now, perhaps due to stabilizing steel prices.
No. 4 Steel Dynamics Inc.
Steel Dynamics was founded in 1993 by three former Nucor executives who had $370 million in financing to kick-start their new business venture. They set out to become a low-cost leader by advancing mini-mill technology. Today, it produces steel products that include hot roll, cold roll and coat sheet steel. The company has about 13 million tons of steel shipping capacity.
Valued at close to $12 billion, this steel stock has less than half the market cap of Nucor. It also has a slightly lower EPS, though its P/E ratio is also lower. Depending on your strategy, though, it may also be a plus that STLD sells for about half of NUE’s price. STLD’s 1-year return is about 5%. Its revenue in Q1 2022 was about $5.5 billion. Also, analysts recommend buying the stock with potentially double-digit returns over the next year.
No. 3 Cleveland-Cliffs Inc.
Cleveland-Cliffs is based in Cleveland, Ohio, and is the largest flat-rolled steel producer in North America. It specializes in the mining, beneficiation and pelletizing of iron ore in addition to steel production. The company also acquired ArcelorMittal USA and AK Steel in order to become more vertically integrated from the process of mining to the manufacturing of steel products.
Cleveland-Cliffs is smaller in size compared to Steel Dynamics with a market cap of under $10 billion. It doesn’t pay a dividend, but the stock is undervalued and has a low share price. This steel stock’s most recent quarterly revenues were close to $6 billion. Sentiment around the stock is strong, and analysts recommend buying the stock as it should continue to rise.
No. 2 United States Steel Corp.
United States Steel Corp., also known as U.S. Steel, is another steel company with roots going back to the early 20th century. It recently acquired Big River Steel in order to expand its mini-mill capability in addition to its integrated technology. The company’s products include sheet steel, steel plate, and tubular steel. In 2018, it was the second-largest steel producer in the U.S., trailing only Nucor.
U.S. Steel is valued at close to $5 billion, and like most steel stocks, is currently undervalued. It pays a small dividend that yields around 1%. Its shares sell for around $17 per share and are down about 25% over the past year. In Q1 2022, the company had just under $5 billion in revenue. And the prevailing sentiment right now is to hold, with a possible correction ahead.
Steel Stocks No. 1 Ryerson Holding Corp.
Ryerson is a little different from the other companies on this list in that it is an online metals supplier. However, it is also the oldest company on this list of best steel stocks to buy. It was founded in 1842 and is currently based in Chicago, Illinois. Its products include many varieties of steel, stainless steel, aluminum, alloy and more. It also offers value-added processing such as splitting, sawing and blanking.
Ryerson is also a smaller company with a market cap of below $1 billion. However, for a company of its size, it posted an impressive $1.7 billion in revenue for Q1 2022. Its shares sell for around $20 and are up around 40% over the past year. It also pays a 2.5% dividend. There are not many analyst opinions on this company given its size, but one recommended holding it. However, its 1-year return certainly makes it appear tempting.
About Bob Haegele
Bob Haegele is a personal finance writer who specializes in investing and planning for retirement. His hefty student loan burden inspired him to pay off his loans, and now he’s helping others get their finances in order. When he’s not writing, he enjoys travel and live music.