But if I knew how to manage my portfolio safer and smarter than most hedge fund managers, I could realistically grow my wealth.
Why Nucor’s future might be even brighter
Nucor has comfortable leverage and liquidity ratios—the management has indicated that it’s looking at acquisitions, that can further add to shareholder value.
While Nucor has been able to post good results for this quarter, the overall conditions in steel markets still remain challenging—the industry is marred by globally low capacity utilization.
Steel mill profitability increased at Nucor owing to strong demand as well as supply disruptions at some of its competitors—due to these disruptions, caused by adverse weather earlier this year, Nucor was able to get some customers from its competitors.
Nucor has been able to maintain its healthy liquidity condition in this quarter also—apart from a credit line of $1.5 billion that wasn’t utilized, Nucor has another $1.1 billion of cash and cash equivalent.
Nucor has been a pioneer in technological innovations—it has a history of backing new technologies that others doubted.
Compared to the industry average and industry peers, NAT trades at the lowest debt to equity and debt to assets ratio which exposes the company to minimal risk, but maximum shareholder returns.
In the future, the company estimates that after the acquisition of vessels or other forms of expansion of vessels, NAT should be able to pay higher dividend per share and produce higher earnings per share.
Improving operational performance is clearly indicated by the company with observations per inspection for the 1Q14 reduced to just 3.4 observations—an excellent result and considered industry best practice.
The formation of NAO is based on the similar business model as NAT—it’s expected to generate clear synergies between the two companies with a major focus on general and administrative costs.
NAT maximizes its cash flows by employing all of its vessels in the spot market through the Orion pool—the spot market gives better earnings than the time charter market over time.
In the fall of 2004, NAT owned three vessels and at the end of 2013 it owned 20 vessels—Suezmax tankers—with tankers averaging ~156,000 deadweight tonnage (or dwt) each.
While other steel companies find their profits and the dividends drop in cyclical downturns, Nucor maintains a healthy dividend yield.
The valuation difference between Nucor and other U.S. steel companies has been a historical phenomenon.
Nucor has a rating of “A” from Standard & Poor’s.
Nucor gets almost half of its revenue from the construction industry.
The final selling prices are a function of multiple factors like global prices, demand for steel, and overcapacity in the industry.
To fulfill its iron ore requirements, Nucor has a DRI plant in Trinidad.
Nucor recently started production at its DRI plant in Louisiana.
According to Nucor “Empowerment isn’t a corporate buzzword—it’s a way of life.”
Sales growth remains a key driver for steel companies.