If you expect our recovering global economy to boost demand for steel as more construction and infrastructure projects get underway, then you should consider adding steel to your portfolio. Meet Nucor (NYSE: NUE), a compelling steel company.
Nucor has grown into the largest U.S.-based steel producer by doing things differently. For starters, none of Nucor’s plants are unionized. But it still treats its employees well, offering a performance-based compensation plan including profit sharing and a 401(k). (That’s right – no pension.)
The company hasn’t laid off an employee for financial reasons in more than 30 years. Unlike its rivals, Nucor has been profitable in almost every year of the past decade, even with a recent oversupply depressing steel prices.
Whereas steelmakers typically have huge central facilities, Nucor employs smaller, efficient, locally based mini-mills. It also crafts a lot of steel from scrap metal instead of via metallurgical coal. Nucor recently bought Skyline Steel, specializing in large-scale steel foundations, which will boost its range of operations.
With a price-to-earnings (P/E) ratio in the 30s, the stock doesn’t appear to be cheap. But those numbers will change as earnings pick up, and Nucor merits at least a spot on your watch list. For patient believers, its dividend recently yielded 3.1 percent. (The Motley Fool’s newsletter services have recommended Nucor.)
Ask the Fool
Q: Where can I look up a company’s recent stock splits? – H.W., Prescott, Ariz.
A: You can start with the company itself, by calling its investor relations department. If you’re online, head to finance.yahoo.com, enter the company’s ticker symbol and click “Look Up.” Then choose “Basic Chart” in the blue bar on the left. Right under the chart and above more data you’ll find a list of recent splits. A “3:1” notation reflects a split where shareholders got three shares for every one they owned. For lists of past and upcoming splits, visit biz.yahoo.com/c/s.html.
Stock splits are generally nonevents, though. The share price gets adjusted down in proportion to the increase in share count. So while suddenly owning more shares can be exciting, it’s not too meaningful. Pre-split, you might have owned 100 shares priced at $40 per share (total value: $4,000). Post-split, your 200 shares are worth about $20 each, for a total of … $4,000. Not much has changed.
Q: When stocks fall, should I move my money into bonds, and vice versa? – A.N., Endicott, N.Y.
A: Do that, and you’ll be selling low, instead of buying low and selling high. Think for yourself and don’t follow the crowd. Decide, for example, how much of your nest egg you want to keep in bonds. Young people might want to be close to 100 percent in stocks, while those near or in retirement might want to have a chunk of their money in bonds. Stick with your desired allocation until you have a good reason to change it. The reason to diversify across categories is so that when one slumps, the other might offset the loss (though that doesn’t always happen). Healthy fallen stocks tend to recover.
My dumbest investment
I manage my brother’s portfolio and my own. I bought Visa at $110 for the two of us. When it was near $130, I called it quits. Boy, that was dumb – it has recently been near $180. I made my brother continue to hold it, and he’s sitting pretty. Sometimes I feel like I give him better advice than I give myself.
There are lots of these examples. I bought 3-D Systems at $33 for my brother after it plummeted, and I sold it for around $40. It’s now near $52. I bought Bank of America at $6.50, watched it fall, and sold it once it returned to $6.50. It hit $15 later. So many future profits missed! I also bought Coffee Holding Co. in 2011 on the recommendation of a CNBC article. I held for a 30 percent loss before I concluded that it was a bad position.
Bottom-line lessons? Have confidence in the long-term profitability of the companies you believe in. Ignore the volatility and noise all around you. – G.L., online
The Fool responds: Amen. Patience can be quite profitable.