How about MT

**vik589** Wed Dec 07, 2005 10:55 am

How about MT
It has low p/e of 4.48 when the industry average is 8.61. With growing demand for steel in china and india this seems like a good play. Any ideas.......Thanks

**blast_investor** Wed Dec 07, 2005 8:09 pm

Hi vik589

I am not big fan of steel stocks in general.

My concern on steel stocks is due to extremely cyclical nature of steel industry and steel stocks. Steel stocks ran up big over past 2 and 3 years mainly due to strong Asian (particularlly China's) economy growth. Now steel stock prices are above book value across the board, not just MT.

China is No. 1 steel consumer in the world wich had 1/3 of world steel demand in 2003. The chinese economy is over-heating in real estate and road/bridge project so that the government is engineering a slow down on its economy. Right now steel price in China is in turmoil. It used to be that US has lower steel price than that of China couple of years ago and right now China has lower steel price than that of US.

Steel stocks right now are not very cheap based on historical earning and steel price data. There are just lots of uncertainty there on this sector, the valuations (including MT) are not compelling enough for me to take cyclical risks in this sector. I am not necessarily bear on steel stocks including MT, but I would just avoid them.

You can read my past 2 articles on "China slowdown", which were mainly on oil sector. But I also touched upon steel as well:
http://www.blastinvest.com/value-investing-newsletter/