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No. of Recommendations: 6
I went through Paul Chi's TMF portfolio this weekend and put ArcelorMittal (MT) on my radar screen. I've been trying to do a KitKatt type analysis but don't have the time (nor probably the skill), and have looked both on their website (which I think is quite good) and M* and Yahoo.

I'm going out-of-town and I'll try to post more later, but I post it this morning because I may buy it this morning. The short case is that it is a solid company that is trading at an VERY low price, near the worst parts of 2008-9, at lower than 50% of BV. At yesteray's close of $18.46, lower than Chi's look, its dividend is about 3.4 percent BUT, the ex-dividend date is November 18. If held for nine months that provides a dividend of 4.5%, that provides additional cushion for a downturn.

Obviously problems with a company that sells in Europe and even some BRICS with what probably IS a recession there. MT may be subject to rising commodity prices with inelastic prices because of the recession. But looking at the chart, I have to believe a LOT of that is built in (this price was first seen in 2004).
http://caps.fool.com/Ticker/MT/Chart.aspx?source=icasittab00...

Good explanation by Chi. I have NOT looked at this over a long period (as I usually do), but today it is my alternative to NWLI or more Berkshire.

From Chi:
http://www.fool.com/investing/general/2011/11/08/1-steel-sto...

Hockeypop
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No. of Recommendations: 1
Hockeypop,

Did you buy? ;)

I like Paul Chi's report, but one thing that **does** stand out is the debt. Does this worry you at all?

BTW, thanks for the link: I look at the Rising Star Portfolios series now and then, but sometimes forget it's there!

Pete
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No. of Recommendations: 5
One possible alternative play on Arcelor is SXC, Suncoke Energy. They're a major supplier of coke to Arcelor, and are partnering with them on building a facility in Brazil.

The nice thing about Suncoke is that they were just recently spun out of Sunoco. They're under followed and statistically spin offs do quite well. This is especially true as they pay down the debt from their spin off. The one thing to watch is that sometime over the coming year, Sunoco will sell the remaining shares it has of Suncoke, which will apply some temporary downward pressure.

Ken
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No. of Recommendations: 1
Ken,

Looks good, too. Nice little write-up at:

http://www.fool.com/retirement/general/2011/11/07/5-star-sto...

This may be a good way to go if you're looking more for share appreciation rather than a dividend play, too.

Pete
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No. of Recommendations: 4
What a day. Yes I did buy, and jumped in with both feet for me. I placed a limit order too low, did what people pay me for until 1:00. Cancelled that and put in another order then got in the car for six hours. I just found out that was filled, but about $.20 too high after it came down again. I have to get up at 4 am to catch a plane, but with all the reading I thought this was a good buy.

Unless TMF is wrong I get LT debt to equity of .40 and total debt to equity of .46. That doesn't seem excessive. Interestingly TMF has their dividend payment wrong. Going forward its $.75

Morningstar shows that LT debt is the lowest it's been in five years, and ST debt is in line with the last five years.
http://financials.morningstar.com/balance-sheet/bs.html?t=MT...

If you're interested, here is the website:
http://www.arcelormittal.com/
They have separate sections on debt and bonds outstanding.

Here are the dividend dates. They also seem to have a share buyback program in place.
http://www.arcelormittal.com/index.php?lang=en&page=613

They do have a problem with Brazil and other places. But it does seem "bond-like" and I think I have enough time because of the dividend and the discount to read more.

Hockeypop
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No. of Recommendations: 3
The steel industry, which is very cyclical, has only come back a way since the "great recession" and if there is a further downturn in the economy it's likely to flounder anew. Assuming the US does avoid a new recession growth will likely be less than 2%. Even if the US avoids a recession there's a possibility that Europe will not and the Chinese economy's prospects, at this juncture, I think, are uncertain. The steel industry is not a place for the faint hearted now, but assuming that domestic and world economies improve in the next few years, there are probably some bargains to be found.

One of the things I noted on Arcelor Mittal was that the stock has a history of extreme volatility in valuation and stock price. It's worth noting that although it's probably a bargain at present prices, provided you can stomach volatility, in both 2002 and 2004 it traded for an average P/E of around 3 (Value Line figures) even though it was experiencing rising earnings. This is less than half of it's present P/E. Whether it will ever revisit those regions again, nobody knows, but I think it worth noting.

Another thing that strikes me about companies in the steel industry is that returns on equity and capital in the present environment are generally fairly poor, and in Arcelor Mittal's case very poor, coming in at just under 5% last year. It's my inclination to stay away from such a volatile stock whose earnings, profit margins, returns on capital, and stock price are all over the place. Also, there doesn't seem to be reasonable certainty in what earnings will do next. Value Line gives them an "Earnings Predictability" rating of 10 (out of 100).

The above average dividend is one attractive attribute. However, MT doesn't have a long history of sustainable, or reliable dividends. It seems it rather depends on their earnings, which of course makes sense. After raising the dividend for four consecutive years they slashed it by 50% in 2008 and it has remained at that level ever since. Value Line does not expect them to raise it again into 2014-'16.

kelbon
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No. of Recommendations: 2
Thanks Kelbon! Sorry it took time to get back.

Well I guess I'll always second guess a decision when the stock falls 3%, 2% off my entry price, the day after I enter. But, I figure that I've got about 5% to play with over 9 months with the existing dividend, and could even sell in a week and be about even. Otherwise I wouldn't have jumped in so quickly.

Again, I read about everything this weekend and your point is well made. I did see a message indicating that they felt that they were better able to sustain the dividend having gone through the 2008-2009 experience. But, this won't be a dividend champion.

In addition, there is a Seeking Alpha story that talks about slowing their movement into Brazil and closing of some plants which I took to mean that they are conserving cash in this environment (on the road so can't find it but it may have been yesterday).

You'll remember that I use this "value sandbox" to find undervalued individual stocks and have sold much of my core index funds and am bearishly in cash and ST except my CREF REIT. For this sandbox I have Mungofitch's "disaster puts" on SPY to defray what I believe will be another fall. So, with few real European stocks, I chose MT. Another 3% fall and I'll second guess myself even more.

After your post I went to Vanguard and had the dividends put into my tax-deferred money market rather than reinvested as a short term waffle. We'll see.

Again, thanks to all for reactions!

Another busy day being the "trophy husband" on my wife's arm as she's honored at the FSU homecoming. Paybacks are H*ll, but in this case fun. We went back to the Tallahassee Mall where we met at a health fair. Drove by my "slum apartment" were I existed as a graduate student (we'll see if I can look at the inside today), and ate at the fancy French restaurant (changed locations but same management) where 32 years previously we celebrated my new job in Nebraska and I proposed (well, not exactly proposed but asked her if she wanted to come to Nebraska with me ... she agreed ... and I thought "Sh*t, I'm going to get married ;-)

We'll see if hurrying the decision for MT was good or bad. This weekend IS good! Off to listent to Mrs. Hockeypop address the nursing faculty and students.

Hockeypop

Hockeypop
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No. of Recommendations: 2
PinotPete:

For the past two weeks I've been hoping against hope that no one here followed me into MT. It plummeted about 20% in about 5 days after I recommended it,and reported many problems. I don't mind losing money but I sure hate it if someone follows me into it, especially when I didn't provide enough information and broke my rule of following the stock for a while.

IF you did, then you should know IT'S BACK. It's kind of scary because besides some good news in Europe CNBC reported it as a short-term buy today.

Despite being on a crazy series of flights for 12 hours today, while on a plane for two hours on the tarmac I found MT was back AND sold it -- at a profit. Between the dividend (losing the tax because I mistakenly put it in a tax-deferred account) and the profit, I made an insane percentage on my money.

I completely attribute that to 1) superior intellect (BUZZZZ- no) 2) extensive research (HaHaHaHaHA) 3) dumb luck (Bingo!).

I hope I didn't screw you up, but you do have a window to make me feel less foolish.

Hockeypop
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No. of Recommendations: 0
IF someone did buy MT and is thinking of getting out, FWIW it is up another .5% in Europe this morning. Can't tell if that is a result of yesterday in the US, or a precursor for later this morning on the NYSE. It would be like me to have gotten out early. Such is the result of not studying enough!!!
http://www.arcelormittal.com/

Hockeypop
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No. of Recommendations: 0
For those who haven't seen the continued problems with ArcelorMittal:
http://www.trefis.com/stock/mt/articles/123376/arcelormittal...

Higher wages in Kazestan, deferred building in Brazil, and problems with margins. A tough time for the steel industry, but eventually ...

Price down about 20% since we discussed it in December. Thanks Kelbon for causing me to wait on a purchase (or actually I bought and then sold after the divvie).

Hockeypop
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