As steel and mining stocks dive, isnt now a good time to buy them?

Question

for a long term investment......long term meaning up to 5 yrs.

yes i own some and am watching them tank over the past month,..im not worried, ill be buying more as it continues to drop in price for two reasons-

1-steel is not about to be replaced by another product on the market

2-the US auto industry will rebound in years to come, as will housing and construction.

best to buy these stocks while they are dirt cheap..

can anyone shoot holes in this?

Answer 1

You are RIGHT... think about coal and other metal/ mining outfits , too.

China has a 147 Billion dollar earthquake rebuiling program in the works...much, much, more than went into the Olympic build-up.

... and they never stop improving infrastructure to make trading and exporting easier. Spending money to make much, much more.

" Demand" may waver...but it won't be "destroyed."..competition  for raw materials increases as competition for market share does... if other major exporters see China moving ahead, they increase their demand...GOT TO !

Answer 2

not if they continue to go down. there is still plenty of room for them to go lower and u lose money

Answer 3

Ok redneky, I will honestly give you some sound advice here. Wall street is very trendy, and big money moves in cycles. The Steel boom is gone, and major investment firms are taking out money and continue to diminish their stakes in commodities plays such as coal, steel, oil, etc. While you rationalize two good points, there are dozens micro/macro and psychological points that are weighed in more importantly then the two you listed.

Number One. above and beyond all things - Investors and hedge funds put money in these commodity stocks as a hedge against inflation and especially a weak dollar. Currency Exchange plays a huge part in commodity stocks. Overall Everyone believes the Dollar will start to strengthen over the next few years, as it already has greatly in the last two months. Until this sentiment changes, these stocks will not yield big returns for the small investor no matter how profitable the companies are think they will be. This can have an added pressure on margins for companies like US Steel and Reliant Steel, as they get a majority of sales from overseas and have benefited from a weak dollar.

Number Two. Global Infastructure growth. The primary reason that steel stocks went on such an unbelievable run, was international growth of infastructure. New Data over the last 3-4 months has CLEARLY showed a decline in growth in China, India, Russia, and the US.  Investors know this, and trust me, the minute they hear "slowing growth" they run like cockroaches when the lights turned on.

Number Three. Why slowing growth we ask? Well, two reasons really. Input cost/raw materials have skyrocketed along with infastructure growth. This is very typical in Economic supply/demand and any business model. Energy at record prices right now are putting a giant "squeeze" on margins. The cost to make steel is getting so high its offsetting the profit the great profits they were making. Simply put if the demand for more steel goes up, eventually everything thats involved with the fabrication and mining of steel goes up with, from the slag, to the ore, from shipping costs, and everything basically involved with process, so it costs more to make, meaning, less profits. Then you have to look at the fact because the cost of producing steel has become so expensive, customers say enough is enough and STOP buying it! Its called "Demand Destruction". Just like Gasoline, just like coal, just like natural gas, just like iron ore. It always happens. You just have to ride the wave up, but definitely be ready to get off at the top of the cycle. Right now, steel is still falling, and I highly wouldn't recommend buying any more at this minute.

This happens all the time in business. Its just another cycle. There will be time to go back to steel, i just don't believe it will be n the next few years. Just my humble opinion. I hope this helps you.

Answer 4

i cannot procide yo with any info about steel.

however GM and FORD, GM or F. those are considered a high risk investment, they could be bought out you know,

However, if the price of crude keeps going down and good news comes out of detroit, ford an gm could shoot up 35% in less than two weeks,

it's a gamble, a good one? i don't know.

Answer 5

US mining and Steel stock are nose diving due to cheaper products from other countries that are being imported into the US.

but that's not the full story, production costs are going up due to Fuel costs rising and labor cost which are rising. transportation costs are going up due to Fuel cost, and the price they can get on the market is going down.

so Costs and competition is going up, Prices are coming down, and profit is disappearing. (note not every company is losing it's shirt some are doing quite well)

so the long and the short of it, unless you know the specific company and stock then it's not a good idea to just buy steel and mining stocks because they are low. (just like not every oil stock is a good buy) often a stock being low might be signaling a bad company about to go under.