Why Steelmakers Popped Today

Is this meaningful or just another movement?

Travis Hoium
Travis Hoium
Sep 7, 2012 at 12:00AM
Other

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.