Few metals have played a role in the advancement of mankind the way steel has over the last few centuries. This humble metal, mostly from iron, was a game-changer for us once we learned how to apply it effectively. The industrial revolution would not have been possible without the unique properties of steel driving innovation and, even today, entire industries are built on the dependence of a supply of this metal.
Those who have owned and supplied this metal have historically achieved fortunes unprecedented for their times. And now that the pandemic restrictions are being lifted, and the world enters into a new phase of infrastructure building -- the same still rings true today. But what steel stocks should you invest in specifically? Which ones have the highest possibility of having the highest returns on investment among all those in the market?
The answer to this question is fairly straightforward: The steel stocks that have the highest amount of demand is the first place you should look. After all, it doesn't matter how big the market for a product is if there's too much supply and no one wants it.
Although steel isn't something people want per se, there are many industries that rely on it heavily in order to create products that are highly desired by nearly everyone, or at least most developed countries. Not only that, but some of these industries include sectors like residential housing construction, machine tools, automotive manufacturing etc., which are all showing strong signs of growth going forward into 2021.
So what top stocks to buy right now in the steel sector should we start our list with?
Top Steel Stocks Of The Year (So Far)
Well, below we have taken the liberty of listing down the 10 best steel stocks to buy this year:
1. ArcelorMittal (NYSE: MT)
Market value: $36.83 Billion
This company is the product of a massive merger between two steel powerhouses. Based in Luxemburg, this company was formed in 2006 after the merger of Arcelor and India-based Mittal Steel. This provided it with a multinational reach and a diverse supply chain.
Over the years, the company has well proved its ability for growth to investors. In the first quarter of this year alone, the company reported stock gains of up to 36% year to date. Overall, the company's dependability and size are indicated by the fact that it accounts for about 5% of the global steel production. With a PE ratio of 14, the stock is still valued at an attractive price, considered by many investors to be a steal. This is because the value is projected to rise amid the upcoming infrastructure push in the US and an expected increase in construction activities in the world.
A great indication of how investors perceive a stock is to look at how many hedge funds are invested in the company. As of the beginning of this year, 21 hedge funds are investing in the company. This is much higher than the 18 hedge funds of the quarter prior. The largest of these hedge fund stakeholders is GQG Partners, with 12.4 million shares, worth $361.97 million.
2. Schnitzer Steel Industries, Inc. (NASDAQ: SCHN)
Market value: $1.48 Billion
Being that steel is one of the most recycled materials in the world, investments in a company that specializes in recycling still are as good as investing in the steel itself. Schnitzer Steel Industries is an Oregon-based steel and steel recycling company with a great track record and generous dividends.
In June of this year, the company proudly announced that it finished steel sales volumes to surpass its previous projections. The company now expects ferrous volumes to be 25% higher than the volumes recorded in the second quarter. Income investors also greatly enjoy the dividend yield of 1.42% the company provides.
As of the beginning of this year, the company has 12 hedge funds investing in it. Higher than the 8 hedge funds of the quarter prior.
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3. United States Steel Corporation (NYSE: X)
Market value: $7.75 Billion
The main selling points for this company are the bullish projections many analysts have concerning its stock prices. For instance, GLJ Research gave bullish comments about the stock in a report, upping its price target for the company to $39.55 from $23.89.
With 22 hedge funds investing in the company, it is clear that many investors believe in its potential for future growth. Billionaire D E Shaw's hedge fund increased its share value in the corporation by 70%, ending the first quarter period with 11.2 million shares of the company. John Overdeck and David Siegel's Two Sigma Advisors was also reported to have upped its hold in the company by 160% in the first quarter.
4. Vale S.A. (NYSE: VALE)
Market value: $108.21 Billion
The largest company to be featured on this list, it can be argued that no portfolio investment in steel would be complete without a few shares of Vale S.A. The company provides a massive 3% dividend yield making for very happy income investors.
In the first quarter of 2021, the company earned a whopping $8.35 billion in adjusted EBITDA in the period, almost triple year over year. Its large investments and operations in China contributed greatly to that.
As of the first quarter, there are 31 hedge funds tied to the company with Fisher Asset Management, with 38.07 million shares of VALE, being the biggest stakeholder.
5. Nucor Corporation (NYSE: NUE)
Market value: $35.99 Billion
The operations of Nucor consist of three main segments: steel mills, steel products, and raw materials. The North Carolina-based company is projected to profit greatly from the falling steel imports and growing patronage of locally produced steel.
It is clear that the company is poised to capitalize on this: offering a dividend yield of 1.58% and plans to allocate about $400-$500 million to maintain the CapEx budget.
There are currently 25 hedge funds investing in the company
6. Gerdau S.A. (NYSE: GGB)
Market value: $9.34 Billion
The Brazilian steel company is rising meteorically in the market despite the pandemic. The stock alone has increased in value by 100% over the last 12 months. The company is also known as a strict follower of CapEx measures to control costs. At the beginning of 2021, the company upped its CapEx guidance to R$ 3.5 billion, more than double the level of 2020.
By the beginning of this year, 11 hedge funds were investing in the company.
7. Steel Dynamics, Inc. (NASDAQ: STLD)
Market value: $14.48 Billion
Based in India, the company has been tearing up the market floor recently in the best possible way. Specializing in hot-rolled sheet steel, structural steel, and merchant steel, almost half of its products are for construction -- something that will be much in demand in the coming months.
Stock prices for Steel Dynamics have gained by 70% over the last 12 months. Analysts in the Bank of America have also increased their price expectancy for the stocks of the company to $61 from $49.
About 26 hedge funds are investing in the company as of the start of 2021.
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8. Cleveland-Cliffs Inc. (NYSE: CLF)
Market value: $12.50 Billion
The price target of the company has been increased to $28.35 from $22.09. This points to analysts' belief in the company's growth, projected at around 0.6x forward 2022.
The company is based in Cleveland, Ohio, and mainly specializes in the mining, beneficiation, and pelletizing of iron ore. It is also well-known in steelmaking, including stamping and tooling. It also holds the title of being the largest flat-rolled steel producer in North America.
As of the beginning of 2021, there are 36 hedge funds tied to the company's shares. The largest of these is Fisher Asset Management which owns 13 million shares amounting to roughly $262.8 million.
9. Olympic Steel, Inc. (NASDAQ: ZEUS)
Market value: $333.37 Million
Another steel company based in Ohio, Olympic steel is a known producer of carbon, coated, and stainless flat-rolled sheet, coil and plate steel, aluminum alloy, tin plate. These materials have been used in the manufacturing of cars, ships, and appliances in the United States since the 1950s.
Stock prices for the company suffered during the pandemic but are set to rebound around this year with the infrastructure boom. Around last year, the company also famously acquired Action Stainless & Alloys, Texas-based stainless steel, and aluminum plate company.
There are currently 9 hedge funds tied to the company. Royce & Associates is currently holding the largest stakeholder with 291,103 shares of ZEUS that amounts to $8.6 million.
10. Tata Steel Limited (NSE: TATASTEEL)
Market value: $1.8 Trillion
Tata Steel Limited is one of the most famous and largest steel companies in the world. Based in India, a massive market that's set to experience its own construction boom. Currently being traded in the Indian stock exchange, Tata Steel Limited's stocks are valued at around 1,173 Indian Rupees ($16).
The company was also given a "Buy" rating by analysts with a price expectancy of 1215 Indian Rupees over the next few quarters.
And those were the top steel stocks to buy this 2021. Steel, and the future part it will play in the projected infrastructure boom, will definitely be a commodity wise investors will keep an eye on. Time and time again it has served as the literal backbone of many of our structural achievements and it's bound to do the same in the future.
That being said, be sure to invest with caution and always practice due diligence. There is no such thing as risk-free investment and guaranteed returns on your investments will only come as a result of research, dedication, and some nerves of steel.
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