August 17, 2023
By Peter Bower
The latest mergers and acquisitions (M&A) activity is among “old economy” steel companies. U.S. Steel, one of the oldest companies in America, is being pursued. Until recently, so much of the M&A activity occurred among the “new economy” types, i.e., high-tech firms absorbing each other. The importance of the “old economy” firms never went away, but it is just now being recognized. Without them, you can’t make so much of what we all need and use every day.
Leadership in the stock market has recently shifted to these firms. They are making money, paying dividends and interest, and still fundamentally important. Some are even growing. How many have heard of Cleveland Cliffs, a pursuer of U.S. Steel? It has grown from an iron ore miner into a vertically integrated provider of a myriad of steel products. In fact, it is the largest provider of sheet steel to the automobile industry. It is also the largest producer of electric steel that is essential to build electric motors.
Investors are taking notice. The industrial sector is being rediscovered. Many of these stocks are cheap and have recently been performing well. Earlier this year, this sector was held back by investor expectation that a recession was imminent. That is no longer true. Warren Buffet just made a large investment in housing stocks. What can be more cyclical than these? Therefore, it is time to seek out more in this overlooked area. Happy hunting and stay steady my friends.
The Lonely Bull
