The
steel industry is often heralded as the backbone of modern society. Its history
is shrouded in mystery, with origins dating back over 4,000 years. A durable
companion to humanity over time, steel has helped shape industries through vast
periods of innovation.
The landscape of the
steel industry continues to evolve at a rapid pace. Select winners have emerged
that were able to adapt to the broader economic and societal changes; these
stocks are telling us a story with their phenomenal returns.
While many commodity
stocks have pulled back off their highs from last year, the bullish run for
steel stocks remains well intact.
Steel ETF Powers to New Heights
History has also
illustrated countless times that stock trends tend to last longer than many
investors realize – particularly strong uptrends breaking out to new highs. The
VanEck Vectors Steel ETF SLX has
outperformed since the last official U.S. recession, delivering a 245% return
over this timeframe:
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Source: StockCharts
The SLX ETF seeks to
replicate the performance of the NYSE Arca Steel Index, which is intended to
track the overall performance of the companies involved in the steel sector.
This index has more than tripled in value from the March 2020 bottom.
The Zacks Steel –
Producers industry group is outperforming the market over the past 3 months.
While showing volatile returns from a longer-term perspective, this group has
widely outpaced the market over the past several years as well:
Despite the impressive
performance, stocks within this group remain relatively undervalued:
Many investors may feel
conservative about investing in a stock that is trading near a 52-week high.
Rather than viewing the price level as concerning, history has shown us that a
stock hitting new 52-week highs is a telling sign of strength. Only the strongest
stocks that are in the most powerful uptrends print fresh yearly highs, and one
steel stock is displaying that exact behavior at this very moment.
Nucor NUE is a
leading producer of structural steel, steel bars, steel joists, and cod
finished bars in the United States. The company boasts 123 operating facilities
primarily in North America. Nucor is also engaged in steel trading and the
rebar distribution business. It serves the agricultural, automotive,
construction, energy, infrastructure, and transportation industries.
