2024-06-01 05:53:25 ET
Summary
- Commodities are in another super-cycle, as shown by the performance of the Bloomberg Commodity Index diverging from stock and bond indices.
- Reliance Inc. is a compelling option in the steel industry, with steady revenue growth and a large customer base.
- RS has competitive advantages in terms of margins, capital-light growth, and surplus cash flow, making it an attractive buy with potential for value creation.
Investment Summary
In our best estimation, commodities are in another super-cycle, and this is further exemplified by the sector's performance over the last three months. As shown in Figure 1, the Bloomberg Commodity Index has diverged from the broad stock and bond indices. The divergence has increased as the S&P 500 Index has levelled off after reclaiming its former highs in May.
Figure 1.
Allocating to the asset class is nuanced, particularly when seeking out equities in the domain. Figure 2 illustrates the performance of various industrial medals—a space that we have become increasingly familiar with in recent years—this year to date. Long steel futures are shown in black, along with copper at the top in orange, and nickel and iron beneath that. Each category has gained value this year....
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For further details see:
Reliance: Exceptional Fundamentals With Compounding Returns