Summary
- Nucor Corporation is very cheap on several fundamental metrics and scores extremely well on several quality metrics.
- Investors in the stock fear for lower revenue and profit in a recession and a return to more liberal trade policies in a non-Trump era.
- Pessimism has already been priced in but it has not happened yet. Maybe it will never happen.
- For high returns I recommend investing with many small positions in this stock and other stocks with similar value/quality fundamentals.
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Nucor Corporation (NUE) produces steel and steel products in the US: for example tubes, bars, sheets, and hot-rolled galvanized steel. The company is also a large recycler of steel. The company owns many factories mainly in the east part of the US, but there are also facilities in Canada and Mexico. In 2018 about 65% of the revenue came from its steel mills. The company also owns several joint ventures accounted for using the equity method. These 50% stakes might be worth about $500 million, so they represent only a small portion of the market cap. The company's strategy is to try to move to more advanced products to keep gross margins healthy. This strategy has been successful: gross margins have increased during the last 8 reporting years.
Why Nucor?
The reason I discuss this company instead of another US-listed stock is its cheapness, in particular low EV/EBIT, combined with a good score on many quality metrics. I source investment ideas using several quantitative strategies with high statistical returns. One of them is the Quantitative Value strategy from Wesley Gray and Tobias Carlisle. According to my implementation of this strategy Nucor Corporation is one of the best stocks among other US-listed stocks.
I always do conventional research into such ideas. I believe such research reduces investment risks. My research focuses on payouts and dilutions over the years, balance sheet strength, signs of financial distress, subsequent events, important disputes and issues involving any unethical behavior, insider pay, substantial shareholders and related-party transactions.
