5 Best Steel Stocks to Buy in June 2021

We are in a commodity bull market and steel prices globally are near their record highs. US steel stocks are outperforming the markets in 2021 and are among the biggest gainers in 2021. With the momentum in steel prices and steel stocks looking strong, here are the five stocks that look like buys in June 2021?

1. Nucor (NYSE: NUE)

With a year-to-date gain of over 91%, Nucor is the second-best performing constituent of the S&P 500. It is the largest US-based steel company and is further investing to ramp up its capacity. The company has significant exposure to rebars that are used in nonresidential construction.

If President Biden’s infrastructure plans see the light of the day, Nucor could be among the biggest benefactors. Not only does it have good exposure to steel products used in the infrastructure sector, but it will also have the spare capacity to supply these once it ramps up the capacity.

Looking at the technicals, Nucor stock trades above its 50-day SMA (simple moving average) and 200-day SMA which is a bullish indicator. The 14-day RSI of 47.8 is also a neutral indicator and shows that the stock is neither overbought nor oversold.

Nucor trades at an NTM (next-12 months) PE multiple of 6.5x which is higher than its peers. However, the stock has historically traded at a premium, and for good reasons. The company has higher margins than its peers and also has an investment-grade credit rating. Its dividend yield is also attractive at 1.59%. Nucor is posting record earnings amid the steep rise in steel prices and the earnings uptrend is expected to continue in the near term.

67% of all retail investor accounts lose money when trading CFDs with this provider.

2. Steel Dynamics (NYSE: STLD)

Like Nucor, Steel Dynamics also produces steel in EAFs (electric arc furnaces). These have a lower fixed cost structure and it is relatively easier to adjust production than the traditional blast furnaces. Like Nucor, it is also investing in new plants which will add to the revenues and profitability in the coming years.

STLD trades above its 50-day SMA (simple moving average) and 200-day SMA. The stock has fallen from the peaks and is approaching the 50-day SMA of $58.83 which could be a strong support zone for the stock. Its RSI is also neutral at 49.9x.

STLD trades at an NTM PE multiple of 5.6x. It has a dividend yield of 1.67% which is higher than the S&P 500’s dividend yield. Earlier this week, the company released its earnings guidance for the second quarter. It said, “Second quarter 2021 profitability from the company’s steel operations is expected to be significantly higher than first quarter results setting a new quarterly record, driven by strong underlying steel demand and significant metal spread expansion across the entire platform, but most pronounced within the flat roll steel operations.”

67% of all retail investor accounts lose money when trading CFDs with this provider.

3. U.S. Steel Corporation (NYSE: X)

U.S. Steel Corporation was once the largest steel company not only in the US but globally. The company has steel as well as iron ore operations. In steel, it has flat-rolled and tubular operations in the US. It also has operations in Central Europe.

While X is a pale shadow of its glorious past, the company has been takings several measures to transform the business. It is investing in modernizing its aging plants and is also shifting to EAFs. X acquired Big River Steel that has added EAFs to its business.

Also, the company is focusing on sustainable business practices and earlier this year halted the construction at its Mon. Valley mill, as it had a higher carbon footprint. X has a diversified product portfolio and its tubular segment should benefit from the uptrend in energy prices as the segment supplies steel products to the energy industry.

From a technical perspective, X stock has come down from its 52-week highs and is approaching the 50-day SMA (simple moving average) which has been a strong support zone for the stock. Its 14-day RSI is also neutral at 49.3.

X trades at an NTM PE multiple of only 2.6x which looks quite undervalued. The company could see a valuation multiple expansion. Its earnings could also get a boost from the strong steel prices. Finally, its asset revitalization plan would soon complete and the company will realize significant structural cost savings post the program.

67% of all retail investor accounts lose money when trading CFDs with this provider.

4. Cleveland-Cliffs (NYSE CLF)

Recently Cleveland-Cliffs was in the news after it featured among the top discussion topics on Reddit group WallStreetBets. The stock soared after Reddit traders targeted it in a short squeeze but have since fallen from the highs.

CLF was an iron ore miner but went for vertical integration by acquiring AK Steel in 2019. Last year, it also acquired the US operations of ArcelorMittal. Earlier this week, it raised its earnings guidance and said that it expects to post an adjusted EBITDA of $5 billion in 2021 and $1.3 billion in the second quarter.

CLF stock trades above the 50-day SMA and the 200-day SMA which is a bullish indicator. However, with a 14-day RSI of 59.3, it is approaching overbought levels. From a fundamental perspective, CLF stock trades at an NTM PE multiple of only 3.6x. The stock looks quite attractive at these prices.

CLF sells most of its steel to automotive customers and will benefit from the expected uptick in US automotive production in the second half of the year. The vehicle production in the first half took a hit due to the global chip shortage with Ford being the worst affected. America’s second-largest automaker expects to lose half of its production in the second quarter due to the chip shortage. However, things are expected to get better in the second half of the year.

With high exposure to automotive-grade steel, CLF could be the biggest benefactor from higher demand from automotive companies.

67% of all retail investor accounts lose money when trading CFDs with this provider.

5. ArcelorMittal (NYSE: MT)

ArcelorMittal is the world’s largest steel company. It is an integrated steel company with steel, coal, and iron ore operations. The company has a long history of acquiring and turning around troubled steel companies across the globe. The company gets most of its revenues in Europe and has further strengthened its presence in the continent by acquiring Ilva which gives MT a foothold in Italian steel markets. It has also acquired Essar Steel in India which strengthens its presence in the Indian steel markets which are among the fastest-growing globally.

Looking at the technicals, MT is getting near the oversold zone with a 14-day RSI of 39. The stock trades above the 50-day SMA and 200-day SMA which is a bullish indicator. MT stock trades at an NTM PE multiple of 6.4x. Over the medium term, the turnaround of Ilva and Essar Steel will add value for MT investors.

67% of all retail investor accounts lose money when trading CFDs with this provider.