Jim Cramer on Steel Dynamics Inc. (STLD): “Even though the stock is very cheap, I can’t support it right now”

We recently compiled a list of the Jim Cramer’s Top 10 Bullish StocksIn this article, we’ll examine where Steel Dynamics Inc. (NASDAQ:STLD) stands relative to Jim Cramer’s other bullish stock picks.

On a recent episode of Mad Money, Jim Cramer expressed his enthusiasm for the current market, highlighting an important historical perspective. He reminded viewers that 20 years ago, Google went public at $85 per share and closed its first day up 18%. While many traders were thrilled by that initial gain, in hindsight, it was a major missed opportunity. The stock has since returned 7,736%, far outpacing the S&P 500’s return of just over 600%. This example illustrates the potential wealth that individual stocks can offer relative to broader indices, especially if you choose wisely.

“Twenty years ago today, Google went public at $85 per share, with no adjustments to value. The stock closed up 18% on its first day. Many traders, thrilled by the initial gain, cashed in on the profit. In retrospect, it was one of the biggest mistakes of all time. The company has since returned 7,736%, compared to a return of just over 600% for the dividend-paying S&P 500. It’s a reminder of the wealth that individual stocks can generate relative to indices when you make smart choices. And I’m telling you, it’s not that hard if you know how to do your research. So I think it’s time to reconsider the average approach, at least for today.”

Cramer noted that despite strong recent performance (the Dow is up 237 points, the S&P 500 is up 0.97% and the NASDAQ is up 1.39%), the near-term outlook for the market is more complex. The market is currently on its longest winning streak since November of last year, with 93% of S&P 500 stocks posting gains.

He cautioned, however, that the market may be “overbought,” as indicated by the Market Edge Oscillator, a tool Cramer has relied on since 1987. When the oscillator reaches plus five or above, it signals that it may be time to sell. Conversely, readings of minus five or below indicate oversold conditions, suggesting that it’s a good time to buy.

“While it was another good day for the markets, we need to consider both the short-term and long-term outlook. The short-term picture is not as favorable. We are currently on a significant winning streak, with the market up for several consecutive days, the longest streak since November of last year. It is impressive to see that 93% of the S&P 500 stocks are up.”

This follows a Monday when the market fell sharply due to the implosion of the yen carry trade, leading to a wave of forced selling and the panic that followed.

“As I have often said, panic is not a strategy. Since this panic, the market has been largely oriented upwards.”

Cramer also expressed concern about the upcoming Justice Department case against the search engine giant’s role in the ad exchange market. The court case could have a significant negative impact on the company, which has benefited greatly from the situation. A Justice Department victory could be even more damaging than the previous litigation with Apple over default payments from search engines, which contributed to its monopoly concerns.

According to Cramer, the resilience of tech giants is evident, with strong recoveries even after short-term declines.see The 33 Most Important AI Companies You Should Pay Attention To).

Jim Cramer points out that investing in truly exceptional companies, rather than simply following stock indices, generally leads to the best returns. Cramer advises investors to avoid panicking during market fluctuations and focus on owning solid companies to ensure their long-term success.

“As we move forward, it’s important to remember that investing in very large companies, rather than simply following the index, often yields the best returns. Google’s substantial gains over 20 years are a perfect example. Avoiding panic in times of market turbulence and sticking with strong companies is critical to long-term success.”

Our methodology

In this article, we looked at a recent episode of Jim Cramer’s Mad Money series and highlighted ten stocks he’s bullish on. We’ve also included hedge fund sentiment information for each stock and ranked them by the number of hedge funds that own them, starting with the least owned.

At Insider Monkey, we’re obsessed with the stocks that hedge funds are heavily invested in. The reason is simple: Our research has shown that we can outperform the market by mimicking the best stock picks of the best hedge funds. Our quarterly newsletter strategy selects 14 small- and large-cap stocks each quarter and has returned 275% since May 2014, outperforming its benchmark by 150 percentage points (see more details here).

Steel Dynamics Inc. (NASDAQ:STLD)

Number of investors in hedge funds: 34

Jim Cramer spoke about Steel Dynamics Inc. (NASDAQ:STLD) in response to a viewer question. He said that while Steel Dynamics Inc. (NASDAQ:STLD) is a strong company, it is facing challenges due to an increase in steel imports from China via Mexico. Cramer noted that there is insufficient enforcement against these imports, which is negatively impacting Steel Dynamics Inc. (NASDAQ:STLD) and its competitor, Nucor Corporation (NYSE:NUE).

“Steel Dynamics is a great company, but we are currently facing a wave of steel dumping from China through Mexico. We are not effectively addressing this issue, which is negatively impacting Steel Dynamics and Nucor, the two best companies in the sector. It is difficult to monitor, and even though the stock is very cheap, I cannot endorse it at this time because of the situation that is unfolding under the border.”

Steel Dynamics Inc. (NASDAQ:STLD) is expected to experience substantial growth on the back of strong earnings and efficient operations. Steel Dynamics Inc.’s (NASDAQ:STLD) investment in a new steel rolling mill in Sinton, Texas, will increase its production capacity and improve its profit margins. This growth is supported by ongoing infrastructure projects in the United States and strong demand for steel in the automotive and construction sectors. Steel Dynamics Inc. (NASDAQ:STLD) also benefits from its integrated business model, which includes steel production, metal recycling and steel fabrication, which allows it to effectively manage costs and increase profitability.

Steel Dynamics Inc.’s (NASDAQ: STLD) use of electric arc furnace (EAF) technology supports its commitment to sustainability and meets the growing demand for environmentally friendly steel. Additionally, with a strong balance sheet, low debt and robust cash flow, Steel Dynamics Inc. (NASDAQ: STLD) is well positioned to pursue new growth opportunities, including acquisitions and shareholder compensation.

Here’s what Steel Dynamics Inc. (NASDAQ:STLD) CFO Theresa E. Wagler had to say during their latest earnings conference call:

“Good morning, everyone. Thank you for joining us and thank you to the teams for another strong performance. Our second quarter 2024 net income was $428 million, or $2.72 per diluted share, with adjusted EBITDA of $686 million. Second quarter 2024 revenue of $4.6 billion was slightly below the first quarter sequential results due to lower realized steel prices. Our second quarter operating income of $559 million was 26% below the first quarter results due to lower steel margins as prices declined more than scrap raw material costs. Our steel operations generated operating income of $442 million, down 34% from the prior quarter due to lower average realized prices of $63 to $1,138 per tonne, while total shipments were generally flat.

“Uniquely, all of our steel mills, with the exception of Roanoke, experienced planned maintenance outages in the second quarter, which impacted utilization and associated conversion costs for the quarter. Additionally, our Sinton, Texas flat-rolled steel division operated at nearly 60% capacity for the quarter, compared to nearly 70% in the first quarter, due to the outages required to implement the necessary changes, which Barry will describe in a moment. Operating income from our steel mill recycling operations was $32 million, significantly higher than the sequential first quarter results, despite lower realized prices as volumes increased and the team continued to gain operational efficiencies. As many of you know, we are the largest metal recycler in North America, processing and consuming ferrous scrap and aluminum, copper and other nonferrous metals. » (Continue reading here…)

STLD global ranks 10th on our list of Jim Cramer’s top bullish stock picks. While we recognize STLD’s potential as an investment, our conviction lies in the belief that under-the-radar AI stocks have more promise to deliver higher returns, and in a shorter time frame. If you’re looking for an AI stock that’s more promising than STLD but trades at less than 5x earnings, check out our report on the the cheapest AI stock.

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Disclosure: None. This article was originally published on Insider Monkey.