3 Reasons to Sell U.S. Steel Today

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Acting on panic never helps investors, but it's still a good idea to question why you're really buying individual investments.

Consider steelmaker U.S. Steel (NYSE: X  ) . Though basic infrastructure commodities like steel tend to stand the test of time, you'll find a few of the 2,060 Motley Fool CAPS members weighing in on the company being bearish.

Here at The Motley Fool, we like to consider both the good and bad sides of an investment, so in this article, I'm highlighting three of the main bearish arguments on U.S. Steel today. Be sure to read the bullish side as well, and then weigh in with your own comments below or rate U.S. Steel in CAPS.                                               

1. Money loser
While steel peer Nucor (NYSE: NUE  ) swung back to a second-quarter profit compared to a year ago loss, it has been tough for U.S. Steel to snap out a profit since the recession. It recently posted its sixth consecutive quarterly loss, with the bottom line affected by a weaker euro and higher operating expenses. And with some forecasting that ArcelorMittal (NYSE: MT  ) expects a sharp drop in third-quarter earnings, there are some ominous signs for the industry in the short term.

2. Bleeding cash
Some CAPS members are voicing significant concern regarding U.S. Steel's high debt load and the amount of cash it has been burning lately. While competitor Steel Dynamics (Nasdaq: STLD  ) has been able to generate positive cash from operations in recent quarters, U.S. Steel's operations have been blowing through cash, and even though its current ratio is still solid, some investors are shying away from the steel giant in favor of more hearty peers.

3. Choppy recovery
Despite an increase in second-quarter sales, U.S. Steel, among others, sees challenges ahead that could cause more volatility in the stock. It has seeing slower order rates from spot market customers, while competitor AK Steel (NYSE: AKS  ) is cutting capacity amid weak demand. Around the globe, iron ore producer Vale (NYSE: VALE  ) sees slowing steel demand in China, and BHP Billiton (NYSE: BHP  ) expects a surplus of steel to affect demand for iron ore and coking coal as well.

To see details of what CAPS members are saying now about U.S. Steel, just click on over to Motley Fool CAPS and have a look -- or add your own thoughts directly to this story in the comments box below.

The Motley Fool Stock Advisor service looks for companies with strong management poised to beat the market over the long haul. To see all the stocks that have helped Tom and David Gardner beat the market by 60 points on average, take a free 30-day trial.

Fool contributor Dave Mock can easily come up with three reasons to have dessert before his dinner. He owns no shares of companies mentioned here. Nucor is a Stock Advisor recommendation. The Fool's disclosure policy is better at predicting the winner of the Super Bowl than political elections.

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10/21/2016 4:00 PM
AKS $5.16 Up +0.14 +2.79%
AK Steel Holding CAPS Rating: **
BHP $34.96 Down -0.06 -0.17%
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MT $6.68 Up +0.15 +2.30%
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United States Stee… CAPS Rating: **