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How to Play AK Steel amid High Volatility



AK Steel

AK Steel (AKS) is among the most volatile steel stocks, with a three-year beta of 3.2x. Although steel and the broader metals and mining space (XME) have never been known for low volatility, AK Steel tends to see wild price swings.

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Price action

AKS stock reached a high of $10.21 in December 2016 after Donald Trump lifted US steel stocks. Trump’s election fueled a rally in the sector and both AK Steel and U.S. Steel Corporation (X) quadrupled that year. However, AK Steel stock then fell in 2017 and 2018. Last year, AK Steel fell more than 60% despite the imposition of Section 232 tariffs. Nucor (NUE), Steel Dynamics (STLD), and ArcelorMittal (MT) also fell last year, whereas Cleveland-Cliffs (CLF) managed to close in the green.

This year, AK Steel had risen 26.7% as of March 12. Meanwhile, brokerages aren’t quite bullish on the stock, and their target prices imply an upside of only 2.5%. However, analysts’ target prices aren’t necessarily the sole yardstick for measuring a stock’s potential. It’s worth noting that AK Steel’s target price was over $6 last year before Trump announced the Section 232 tariffs.

Series overview

In this series, we’ll look at AK Steel’s drivers and valuation and gauge how markets are pricing the company’s risk-return profile. Let’s begin by looking at AK Steel’s outlook.


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