There's a BOGO Sale on Companhia Siderurgica Nacional


The world's top value investors love it when their best stocks ideas are selling at bargain-basement prices. For those rarified investors, companies offering fire-sale prices become no-brainer buys. So regular investors like you and me would do well to emulate the masters and look at companies offering a "buy one, get one" sale on their stocks.

With the global economy still wallowing in a malaise from which it has yet to recover, it's not surprising that Companhia Siderurgica Nacional , one of the largest vertically integrated steel companies in the world, let alone Brazil, is languishing. Even the once seemingly bulletproof economy of its home country could barely muster 1% growth last year, and 2013 isn't looking too promising, either. Economists believe Brazil will be lucky to see 3% growth this year, a target below even the modest 4% GDP growth rate pegged by the government.

Since CSN derives around 63% of its revenues from Brazilian markets and another 15% from Europe -- which itself suffered a near 9% decline in demand for steel last year, according to ArcelorMittal -- the fact that CSN's stock is down 51% from its 52-week high isn't surprising. What might raise an eyebrow, though, is the high opinion of it still held by investors. Motley Fool CAPS shows that the steelmaker maintains an above-average four-star rating with 96% of the 924 members weighing in on it believing it will be able to outperform the broad market averages.

You'll, of course, want to do your own due diligence before buying in to see if this is really a chance to pick up a quality stock at a severe discount, because you want to make sure there's nothing seriously wrong with it before plugging it into your own portfolio.

Nerves of steel

Even in the face of the gloom that settled over the steel industry in 2012, there are plenty of indications that 2013 could be witness to the early stages of a larger recovery.

The U.S. housing market is regaining its footing with home prices rising while the combined sales of new and previously owned houses rose 9.9% last year. The automotive industry as well looks on pace to produce 15.38 million cars in 2013, well ahead of analyst expectations of 15.1 million vehicles.

China is also looking strong. The world's second-largest economy snapped a seventh consecutive quarter streak of slower growth by posting GDP expansion of 7.9% in the fourth quarter, beating the 7.7% increase economists had anticipated. While that's the slowest period of growth seen in more than a decade, it suggests that China may have finally bottomed out. That's important for CSN because Asia represents another 17% of its revenues.

Man of steel
According to the World Steel Association, global steel consumption is expected to rise 3.2% this year and even ArcelorMittal is looking for steel sales to rise 2% to 3% with iron ore sales up as much as 20%.

Europe remains the wild card with ministers there looking for capacity cuts of around 25% over the next three years. The contraction will allow the continent to remain competitive in the global steel industry, but that provides CSN with an opening for expansion as it's not subject to the same political vagaries as its rivals. ArcelorMittal, for example, was threatened with having its French plant nationalized unless it guaranteed workers wouldn't lose their jobs if it closed two blast furnaces. An industry in contraction and saddled with onerous rules could be where CSN gets hot selling its wares.

All eyes are on Brazil
Even so, the real fulcrum for CSN's growth will be Brazil because of its outsized contribution to revenues and there are indications beyond its GDP that it is under way.

Brazilian flat-steel makers were able to raise prices to distributors by as much as 8% recently with CSN hiking its own prices for hot-rolled steel coil by 7.2% and for cold-rolled sheets and galvanized products by 3.5%. Usinas Siderurgicas de Minas Gerais is looking to raise prices for some steel products between 6% and 12%. There may be some question as to whether the price hikes can stick, but the harsh spiral of falling prices that sharply affected the results of Arcelor, U.S. Steel, and AK Steel seem to have finally been reversed in Brazil.

Then there is the 2014 Football World Cup and the 2016 Summer Olympics that Brazil will host. These events tend to spark large rounds of infrastructure improvements, but many are publicly wondering whether Brazil will be ready in time. If for no other reason than to save face, it's safe to assume the government will direct a lot of resources to these projects in the year ahead. Brazilian mini mill specialist Gerdau , which is supplying steel to all 12 stadiums involved in the football tournament, said last month it expects spending to accelerate this year on those venues.

Massive stimuli
There's still weakness, of course, as global capacity slipped to 71% in January from 75% a year ago, according to the world steel group, but the government announced a $66 billion 25-year stimulus program last summer that will be invested in the country's road system and railroads. Some 60% of that money will be spent within the next five years.

Global economies are still shaky to be sure, but most are moving in the right direction and Companhia Siderurgica Nacional as one of the biggest steel players will benefit from the trends moving in its direction. Let me know in the comments box below whether you agree this Brazilian steelmaker has what it takes to build its stock price back up.

Have half a mind

Cliffs Natural Resources has grown from a domestic iron ore producer into an international player in both the iron ore and metallurgical coal markets. It has also underwhelmed investors lately, especially after its dramatic 76% dividend cut in February. However, it could now be looked at as a possible value play due to several factors that are likely to remain advantageous for Cliffs' management. For details on these advantages and more, click here now to check out The Motley Fool's premium research report on the company.

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Fool contributor Rich Duprey has no position in any stocks mentioned. The Motley Fool owns shares of ArcelorMittal. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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