Bloomberg Anywhere Login

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Communications

Industry Products

Media Services

Follow Us

Businessweek Archives

British Steel: A Sterling Buy?


Inside Wall Street

BRITISH STEEL: A STERLING BUY?

As interest rates fall in Europe, investors are hunting for companies that ride the rising economic tide that lower rates should bring--such as British Steel. Since last fall, the company's American Depository Receipts, which trade on the Big Board, have jumped from 8 to 12 1/4. But their run is far from over.

After a 1992 restructuring that included dropping the dividend, British Steel emerged as one of the world's lowest-cost integrated steel companies. Europe's steel industry is rife with overcapacity, but talks are going on in the European Community that should result in closing 16% of capacity.

Analyst Robert Schenosky at Kemper Securities doesn't expect the company to be in the black until next year. Still, he says it's, well, a steal: British Steel sells for 44 for every $1 of revenue vs. 60 for Bethlehem Steel and 82 for USX-Steel Group. British Steel's debt is only 20% of capital, and unlike its U.S. counterparts, it has no unfunded pension liabilities. Still, the ADRs trade at just 35% of book value.

Value investors love the stock. Wellington Management--which manages Vanguard's Windsor and Wellington mutual funds--holds over 10 million ADRs. "At the bottom of the global recession, invest in a good cyclical company," says Paul Lesutis at Brandywine Asset Management, with 1.9 million ADRs. "This is it."JEFFREY M. LADERMAN


LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus