United States Steel Corporation [NYSE: X]: Research shows that insider buying or selling can indicate the direction that a stock is likely to take. A high level of insider selling usually indicates that a company could be anticipating challenges that could negatively impact on its value. On the other hand, a significant level of insider buying can indicate possible good tidings in the future. In the case of United States Steel Corporation, insiders seem to be buying up. One key company Insider, Kevin Badley has acquired 30k shares through the year. His average purchase price is $24.21, an indicator that he expects the stock to rise way above this value in the foreseeable future.
There are a number of factors that could play a role in pushing up the value of this stock. The first one is the ongoing U.S trade war with China. Trump has already imposed tariffs on steel from China and other parts of the world. With the stakes ever rising in this trade war, companies that have the capacity to produce on U.S soil are likely to have an edge in the market. U.S Steel is the only U.S based steel company that can mine, melt and make steel without having to get anything outside of the U.S. It is also the most recognized steel brand in the United States. Essentially, this means that the on-going trade war between the U.S and China can actually play to strengthen the competitive position of this company.
Besides this advantage that the company is getting due to geopolitical issues, it is also making investments that will help strengthen its position against competitors in the long run. According to the company president David Boyd Burritt, the company has over the last 2 years invested $800 million in American-based engineering projects. He has also stated that in all the projects it has undertaken in the last 5 years, including the one discussed here, they have underspent and are receiving a significant rate of return, to the tune of 22%. This is a clear indicator that the company has mastered the steel business, and has the capacity to carry out projects efficiently, thereby giving it a competitive edge in the market.
The CEO has also stated that, in spite of a difficult Q1, the company managed to beat analyst expectation, and is currently executing on a $1.2 billion value creation strategy. Through this strategy, the company expects to cut operational costs by up to $35 a ton. This will further cement the company’s competitive edge, not just in the U.S, but across the world as well.
With all these investments, it is not surprising that insiders are buying the stock. At the moment, U.S Steel is trading at $16.45 and is down by 2.55% at the time of writing. Looking at the charts, the stock seems to be on a rebound and is currently consolidating below the 3-month 50-day resistance at $17.87. Whether it will push above it in the near-term, only time will tell. One thing is clear though, the fundamentals look good.