Institutional investors managing more than $100 million in assets are required to disclose their holdings to the Securities and Exchange Commission (SEC) in a Form 13F. Hedge funds, banks, insurance firms, pension funds, and companies with large investment portfolios are among those required to submit a quarterly 13F.
Each 13F is a snapshot of the securities that an institution held at the end of the quarter. For the average investor, keeping up with 13F filings is a way to track what the "smart money" is doing.
Many investors consider Warren Buffett to be the quintessential example of smart money. As the chairman and CEO of Berkshire Hathaway, Buffett is arguably the most revered and influential investment manager of all time, overseeing a portfolio of subsidiaries and stocks that has delivered an astounding 5,500,000% return since 1965. Not surprisingly, Berkshire Hathaway's 13F filings generate widespread interest from investors who are eager to see what the "Oracle of Omaha" is buying and selling.
Berkshire's most recent 13F reveals that it purchased 6.6 million shares of Nucor (NUE -0.49%) in the second quarter. Given Buffett's track record of success, would it be wise to follow his lead and start a position in the steelmaker?
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Nucor is North America's leading steelmaker
Nucor is the largest steel manufacturer and recycler in North America, producing roughly 25% of all raw steel in the United States, according to the company. Nucor's broad portfolio of steel and steel products ranges from bars, beams, sheets, and plates to grating, fasteners, joists, overhead doors, and metal building systems. Nucor also has a diversified customer base. Although the company has more than 10,000 customers, none of them generate more than 5% of the steelmaker's revenue.
One of Nucor's key advantages over competitors is that it produces its steel in electric arc furnaces, which are smaller and more efficient than traditional blast furnaces. Electric arc furnaces melt down scrap metal instead of using coking coal and iron ore, resulting in less energy consumption and lower carbon emissions than blast furnaces. Because Nucor owns The David J. Joseph Company -- one of the largest scrap brokers and processors in the U.S. -- it has access to a steady pipeline of low-cost recycled metal.
Nucor has diversified its product mix over the years through a series of acquisitions, as it shifts to higher-margin products and "steel-adjacent businesses" with higher growth potential. A prime example is its 2024 acquisition of Southwest Data Products, which makes and installs data center infrastructure. Nucor rolled the company into its new data systems division, which it touts as a single-source provider of cabinets, racks, cages, and support structures for the burgeoning data center industry.
Nucor's full-year 2024 net sales dipped 11% to $30.7 billion compared to 2023, as the steel industry grappled with soft demand and lower steel prices. But Nucor kept the pedal to the metal on its long-term growth plans. The company spent $3.2 billion on capital expenditures in 2024, and it expects to deploy another $3 billion this year. Multiple projects are underway that could drive growth for years to come.
Perhaps one of the most exciting projects for investors is the buildout of Nucor's towers and structures division, which formed in 2022 with the acquisition of Summit Utility Structures. Nucor is building factories in Alabama, Indiana, and Utah to produce poles and substation structures for the utility industry.
A recent report from S&P Global predicts that U.S. electric, gas, and water utilities will spend more than $1 trillion to modernize their infrastructure over the next four years.
Nucor is a Dividend King
Nucor belongs to an elite cohort of companies that have increased their dividend payments for at least 50 consecutive years: the Dividend Kings. The steelmaker has hiked its dividend every year since it first started paying it in 1973. Nucor's annualized forward dividend yield is around 1.5%, compared to the current average of 1.1% for the S&P 500.
That's not the only way Nucor returns capital to shareholders. Over the past five-and-a-half years, Nucor has repurchased $10.3 billion worth of its shares. With nearly $2.5 billion in cash on the balance sheet at the end of Q2 -- and a $2.3 billion line of credit that's never been tapped -- Nucor is in a strong position to continue investing in the business and rewarding shareholders.
Plenty of tailwinds for Nucor
Like other sage investors, Buffett has cautioned against trying to time the market. Nevertheless, Berkshire Hathaway might have nailed the timing on Nucor. The steelmaker has yet to reap the rewards of its recent investments in new facilities -- six are mentioned in its Q2 investor deck -- but it could soon, with a new rebar micro mill in North Carolina and a new melt shop in Arizona beginning to ramp up production.
Also, the company sees numerous catalysts in President Donald Trump's "big, beautiful bill," including bigger incentives to build steel-intensive semiconductor factories in the U.S. and increased investments in infrastructure and shipbuilding.
The steel industry is highly cyclical, meaning that demand for steel ebbs and flows with the broader economy. But as long as the current expansion phase continues, Nucor could produce the kind of market-beating returns you might expect from a Dividend King.
