Why Steelmakers Popped Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of steelmakers AK Steel (NYSE: AKS  ) and Schnitzer Steel Industries (Nasdaq: SCHN  ) rose 10% in trading today after China announced a major stimulus package.

So what: China approved more than 60 infrastructure projects that will pump $156 billion into the economy. Steel futures soared on the news, and of course, steel stocks followed suit.

Now what: This is no doubt good news for steel markets and may sustain the industry until the U.S. and European economies recover. Schnitzer Steel is trading at just 13.4 times next year's earnings estimates, and considering the company's profitable history, this would be my pick out of the two. I'm not ready to call this a long-term pop given the weakness in the global economy, but it's an incremental positive at the least.

Interested in more info on AK Steel? Add it to your Watchlist. Or maybe Schnitzer Steel Industries? Add it to your Watchlist, too.

Fool contributor Travis Hoium has no position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his CAPS picks at TMFFlushDraw. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 11, 2012, at 4:18 AM, dividendgrowth wrote:

    Short every pop, especially global steel companies. US local steel makers are somewhat protected by tariffs and local demand.

    China's steel overcapacity is so gigantic that those 60 puny projects won't make a dent in solving the problem.

    China's steel will sooner or later spill over to the global market and turn the steel industry into a far worse nightmare for stockholders than the airline industry.

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