U.S. Steel Shares Soared: What You Need to Know
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Good U.S. economic data combined with economic stimulus in China sent steel stocks higher in early trading, none more so than U.S. Steel (NYS: X) . The mill operator's shares surged early and kept climbing, closing with a 15.5% gain. AK Steel (NYS: AKS) and Allegheny Technologies (NYS: ATI) also rallied on the news.
So what: A Macquarie analyst linked the gains to a move by China to reduce the banks' reserve requirements, MarketWatch reported. Lower reserves could free up cash to lend for capital improvements, thereby increasing demand for steel, iron, and other construction materials.
Now what: Those buying today are taking a small but probably reasonable risk. Sure, China's growth could slow at any time, but U.S. Steel trades for less than 11 times next year's earnings. I think that's a reasonable price, and I'll be backing that up with a CAPScall. Do you agree? Would you buy shares of U.S. Steel at current prices? Please weigh in using the comments box below.
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At the time this article was published Fool contributorTim Beyersis a member of theMotley Fool Rule Breakersstock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim'sportfolio holdingsandFoolish writings, or connect with him onGoogle+or Twitter, where he goes by@milehighfool. You can also get his insightsdelivered directly to your RSS reader.Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.