So That Is Why Steel Has Been Strong

By Dr. Duru

January 23, 2006

Oregon Steel (OS) popped two points today, and I was simply baffled. I called a bottom in steel way back in July, 2005 and since then stocks like OS have actually doubled in price! (Please don't ask whether I got rich off my own foresight - ugh!). And yet, despite my prescient call, I have never truly identified some fundamentals to explain the run except perhaps as an inflation hedge or a bet on a resurgent economy. Well, today, Jim Cramer (or "Kramer" as I like to call him), produced an explanation that I can live with.

On Monday's Mad Money, Kramer claimed that OS is a play on pipeline construction. He has insisted for quite some time that the oil industry has entered a vigorous investment phase. He has harped on about the oil drillers, but this is the first time I have caught him harping on pipeline construction, and, in particular, the materials that go into these pipes. Since I have agreed 100% with his bullish oil thesis (and I even stuck to it after he dropped it temporarily), I am excited to finally get a fundamental reason to be bullish on steel. Given Kramer's nod, I am putting stocks like LSS, MVK, and SGR back on my active watchlist. For a trip down memory lane, read what I had to say about LSS on TraderMike's site back when the company warned in October, 2004. That drama turned out to be one fantastic buying opportunity...the stock has nearly doubled since then (sound familiar?). And I will not even mention that MVK has gone nearly straight up since October, 2005 for a 70% gain - a nice triple bottom set up that big bounce!

As always, be careful out there!

DrDuru, 2006