Oh, those wacky markets.

Steel stocks have had a good run so far this year, so that must mean the earnings are great, right? Uh, not so fast. As Income Investor recommendation POSCO (NYSE:PKX) shows, investors are sometimes quite willing to overlook the "now" so long as they still believe in the "later."

While results from Korea's largest steelmaker didn't look all that positive, there's something to be said for doing less poorly than you could have. POSCO's first-quarter revenue was down more than 17% and profits were cut by more than half, but it wasn't all bad news. The company actually cut back total production and shifted more of its output toward specialty (also called strategic) products. I was also pleased to see that the company continues to manage its debt pretty effectively.

The gig now for steel companies would seem to be whether they can all manage to enjoy a little prosperity without killing themselves. If this was the U.S. airline industry and its legions of chimpanzees dressed as senior managers, I'd be very skeptical. But I'm cautiously optimistic that we're seeing better leadership from the leading companies. While I'm not exactly a big fan of Arcelor's team (and its occasionally colorful view on reality), I think there are more well-run places out there than people sometimes believe -- companies like Mittal (NYSE:MT), Nucor (NYSE:NUE), Steel Dynamics (NASDAQ:STLD), and POSCO, for instance.

It's also true, though, that the steel stocks are getting bid up by fast-money hedge fund managers -- some of whom are looking to play a prolonged "super cycle" in commodities, some of whom are looking for more mergers and acquisitions, and some of whom just want to be where the action is. And while I'm sure we'll see more deals before it's all said and done, M&A speculation is a shaky foundation upon which to base an investment thesis.

All in all, I still want to be positive on this sector. I do think the big companies are being more rational, and I'm cautiously optimistic that China realizes that it has to look past the "produce at all costs" mentality of the past and force money-draining mills to close or merge. I'm also reasonably confident that raw material prices can moderate (though companies like CVRD (NYSE:RIO) and Rio Tinto (NYSE:RTP) may have different thoughts there).

Accordingly, while I don't think of POSCO as my best idea in steel, it's not a terrible idea, either.

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Mittal is a Motley Fool Inside Value recommendation. The Fool offers a newsletter for every type of investing.

Fool contributor Stephen Simpson owns shares of Mittal, but has no financial interest in any other stocks mentioned (that means he's neither long nor short the shares).