Thursday, March 21, 2013

New Buy: Nucor Corp

I just can't seem to stop buying stocks at attractive prices, despite the market's continued run up and up. I've been expecting a pullback in the S&P 500 for a while, especially with the market above my year-end target. Even with this neutral/negative view (short-term), I'd purchased over $12 thousand of stocks so far this year between January and February. Today I made another purchase.

I bought 100 shares of Nucor Corp (NUE) for $47.10, a total cost of $4,710. Nucor currently pays a $1.47 annual dividend, increasing my dividend income by $147. Nucor is based in North Carolina and manufactures carbon and alloy steel, steel joists, steel deck, cold finished steel, steel grinding balls, steel bearing products, and metal building systems. This business is very energy intensive.


I have a view that the surplus of low cost natural gas (energy) in our great country will lead to the return of manufacturing on our soil. Think about it: why would we export natural gas to Japan (where they pay ~4-5x the cost for the commodity), have them make steel, and send that steel back here? It's just silly. Nucor will surely benefit from this trend.

I've been eyeing the company for a few months now and saw the Nucor CEO on tv this morning. What got me over the hump to buy was that he said the playing field in the industry is not level. US steel producers are at a disadvantage and are working to change that. A level playing field PLUS low-cost energy makes the US steel industry a huge winner.

Nucor has been increasing the dividend at a strong pace. They've even paid special dividends, which I love. I hope to be a Nucor shareholder for a long time.

2 comments:

  1. Nice. I was fortunate enough to pick up some NUE last summer when the price was in the 37s. Since then it has been on a tear.

    I like that they make most of their steel from reuse of old scrap. I've read in several sources that NUE is the largest recycler in the US. Plus their use of mini-mills is more energy-efficient than their competitors who tend to use large blast furnaces. Definitely a stock to feel good about.

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    1. Picking up shares at $37 would have been awesome. Hopefully we'll look back in another six months/one year and say picking up shares at $47 was a steal too. I bought my BGG position this summer in the $17-range and have loved this run to $24-25. I don't think either run is over. This US Manfucturing Renaissance is very real and long-term in nature.

      Pretty cool that NUE is the largest recycler in the US. And the mini-mill approach surely makes the downside less drastic. Less operating leverage means less risk.

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