Steel Stocks Still Trading Cheap (NUE, X, AKS)

Big steel has been overlooked lately and the best of the bunch are hanging out near 12 month lows, such as Nucor Corp. (NYSE:NUE) now just 9% away from its 52-week low.  Steel won't trade this low forever and that goes for U.S. Steel Corp. (NYSE:X) and AK Steel Holding (NYSE:AKS) as well.

U.S. Steel (X) and AK Steel (AKS) are trading up 20% and 13% respectively from their 52-week lows.  Why care? how about this little gem from the WSJ last week:

Goldman Sachs on Steel Prices: 'Poised to Move Up' | Matt Phillps
The Journal’s veteran metals reporter Robert Guy Mathews had a good story on it back in late October, that ran under a headline that would also make a great title for an action movie: “Cold Steel: A Hard Winter Lies Ahead.” The takeaway: Steel makers expected the fourth quarter to be soft as demand weakened in major markets, such as autos and construction. Here’s how Goldman Sachs steel analysts sized up the situation in a note on the industry Tuesday:

[The fourth quarter] is generally the weakest quarter due to a seasonal slowdown. We do expect a recovery in 2011 but believe it will be very slow with prices moving mostly in response to cost pressure. The addition of new capacity should create more challenges for the industry. In the near-term, we believe that steel prices are poised to move up, and that steel stocks are already starting to reflect this move. Also, the steel sector has lagged significantly thereby prompting interest from investors. As a result we believe that even small positive data points could move stocks up disproportionately.

The S&P 500 steel index has been on a bit of a tear lately. Month-to-date, it’s up 5.7% versus a 2.8% for the S&P 500. Although on a longer timeline it does indeed look like the Steel sector has some catching up to do. Year-to-date it’s down 1.7%, versus the 8% gain for the S&P.

The Fool.com did a great analysis on Nucor last week and if you are starting to warm up to steel, its worth your time - click to read>>