While you were preparing the appetizers for the big game last night, or maybe already enjoying some while watching The Puppy Bowl (my personal favorite), President Trump made a big announcement… once again about tariffs.
As he was enroute to the Super Bowl himself, Trump told reporters that he will impose 25% tariffs on imports of steel and aluminum. If true, this is huge news for America’s steel industry.
The United States would be the biggest winner from these tariffs. Steel imports have already fallen 35% over the last decade, and many attribute that to the tariffs Trump implemented during his first presidency. His first wave of tariffs in 2018 saw a rise in both the steel and aluminum sectors.
Steel stocks surged today on the news, with some companies seeing big gains:
- Cleveland-Cliffs (CLF) +18%
- Nucor Corp (NUE) +5.7%
- Steel Dynamics (STLD) +4.9%
- United States Steel Corporation (X) +4.8%
- Alcoa (AA) +2.2%
- Carpenter Technology (CRS) +1.5%
Clearly steel is having a moment, but I like to invest in longevity. Those companies with strong fundamentals that push them higher in the long-term and not just on headlines.
Let’s run a few of these big-name steel companies through my Quantum Edge system to see if any are worth time and money.
Cleveland-Cliffs (CLF)
Cleveland-Cliffs (CLF) is an Ohio-based steel manufacturer that specializes in mining and steelmaking, including stamping and tooling.
Given CLF’sbig rally today, you might be surprised to see such a low Quantum Score. As a reminder, my optimal buy zone is between 70 and 85, and a score of 41.4 is nowhere near that.
The company has poor one-year sales growth, along with negative one- and three-year earnings per share growth of 34.5% and 63.4%, respectively. CLF’s profit margin is only 1.8% and only 63.5% institutional ownership. That’s the Big Money that I like to see invested in a company.
Take a look at the Big Money signals over the last year.
Source: MAPsignals.com
That’s a lot of red… and they are all sell signals, meaning Big Money is dropping out. We like to see green buy signals before investing, which demonstrates money flowing in and that stocks are set to jump higher.
Tariffs could help change some of this data, but it’s too uncertain at the moment to give the predictability I look for. CLF is a pass for me right now.
Steel Dynamics (STLD)
Steel Dynamics (STLD) is the third largest producer of carbon steel products in the United States. Its Quantum Score of 63.8 is also below the optimal buy zone, but not by much. That’s partly due to its decent technicals of 67.6, but I also like to see traction in the fundamentals.
That’s not the case here. A score of 58.3 is not good enough for my seal of approval. One- and three-year sales growth are both in the red, and STLD sees only an 8.8% profit margin.
Speaking of red, my system picked up five sell signals in the last three months, with the last green buy signal being in November of last year.
Carpenter Technology (CRS)
With a quick look at that Quantum Score, you know I’ve saved the best for last. A score of 77.6 is right where I like to see.
Carpenter Technology (CRS) develops, manufactures, and distributes stainless steels and corrosion-resistant alloys. Its fundamentals also rank just above 70 and technicals even better at 82.4.
Sales increased 8.2% last year and 23.8% the last three years, but earnings grew exponentially more at 152.6% the last three years. It also has 91.4% institutional ownership, and I see only green buy signals over the last year.
Source: MAPsignals.com
Those flashing green lights are exactly what I like to see in a stock, and it’s one of the reasons I recommended this company to my Quantum Edge Pro subscribers back in September. Since then, we’ve seen 20% gains, and CRS is now above our buy up to price.
We may see additional buy signals after today’s action, and maybe more going forward depending on what happens with the tariffs. That would be another data point to consider in the future.
When you invest in high-quality companies that have superior fundamentals, strong technicals, and Big Money buying in, you can weed through the headlines to find the stocks best positioned to move higher and make you money. The headlines can point us in the right direction, but the Quantum Score will set those stocks apart.
Talk soon,
Jason Bodner,
Editor, Jason Bodner’s Power Trends