Gene Marcial, Business Week’s Inside Wall Street columnist, recommended U.S. Steel on Friday:

a.  U.S. Steel shares typically tumble after a negative headline but quickly rebound just before good news comes rolling back.

b.  The stock was languishing at $12 in 2001 because of industry overcapacity and weak demand. A year later, an upturn in demand appeared evident, and the stock vaulted to $37. As U.S. Steel’s prospects improved, so did its stock price, which shot up to an all-time high (at the time) of $93 on Feb. 26, 2007.   U.S. Steel advanced to yet another high of $125 on June 23, 2007.

c. Fast forward to June, 2008: U.S. Steel is again hitting new highs.  There are pockets of plentiful demand for steel in some parts of the world, such as China, India, and Russia.

d. U.S. Steel Chairman’s and Chief Executive told a recent industry conference that the robust demand for steel makes the price rise in raw materials less worrisome.  Worldwide usage of steel is expected to grow yearly at a 6% clip, he says. And steel prices are on the rise, too.

e. Goldman Sachs says U.S. Steel has the highest sensitivity to rising steel prices, which it believes is sustainable, as growth in world demand should exceed supply for several years.

f.  Even if U.S. Steel takes a dive over the next few days, or weeks, the stock’s historical behavior, plus the industry’s currently strong fundamentals, favor bright prospects.  U.S. Steel shares may yet be a Big Steal at current levels, according to Marcial.

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