Stressed Out: AK Steel Is Your Best Bet on the GOP This Election

 | Mar 11, 2016 | 10:26 AM EST
  • Comment
  • Print Print
  • Print
Stock quotes in this article:








This article is part of a Real Money series on 20 companies investors should consider adding to their distressed watch list.

Free trade is a central economic tenet for conservatives who believe any form of restrictions on the flow of international trade -- be it tariffs, quotas, embargoes or subsidies -- lead to harmful retaliation.

In fact, the Smoot-Hawley Tarriff Act of 1930 was one of many ingredients that turned the market crash of 1929 into the full-fledged Depression as we've come to know it. (Smoot-Hawley raised tariffs on imports to record levels in order to protect American farmers and businesses, but resulted in disastrous economic retaliation from foreign partners whose economies were afflicted by the inadvertent strain on exports.)

Nobel Prize-winning economist Milton Friedman, the late twentieth-century champion of free trade who long lambasted such activity, was unsurprisingly an advisor to Ronald Reagan and chief producer of a system of policies now widely discussed as "Reaganomics."

So why are the Republican contenders for president this year turning their backs on the president whose name seems to be ingrained in nearly every policy agenda they promote? (For example, at a recent debate, Florida Senator Marco Rubio said, "If our next president is even half the president Ronald Reagan was, America is going to be greater.")

At Thursday night's CNN debate, Ohio Governor John Kasich, Donald Trump and Rubio all seemed to turn their back on his central trade tenet. And no company stands to benefit more than AK Steel (AKS).

Kasich, whose family worked in the steel industry, argued for "free trade, but fair trade," which is a similar version of Rubio's words and far toned down from Trump's critique that America is getting "ripped off."

Trump also defended a 45% tax he may levy against China as a last resort if the playing field for global trade is not levied: "Forty-five percent was a threat -- not a tax," he said. "It will be a tax if they don't behave."

The DealNewLead Holdings faces perfect storm

West Chester, Ohio-based AK Steel has been in recovery mode this year, and is the best bet on the mounting Republican rhetoric. Especially as the Commerce Department already seems willing to play ball, announcing last week that it would impose a 266% tariff on Chinese imports.

A disastrous 2015 forced many U.S. steelmakers to idle mills, largely because of the damage wreaked by cheap Chinese imports, compounded by low commodity prices and the disappearance of once-reliable oil and gas customers.

Shares of the manufacturer -- which is a member of Real Money's "Stressed Out" watch list -- are up 85% in 2016 alone, along with an 80% gain at Pittsburgh's U.S. Steel (X) and relatively flat performance from Ohio's TimkenSteel (TMST), both of which are also members of the watch list. Meanwhile, shares of the nation's largest producer Nucor (NUE) have risen 12% on the year. 

And as the big gains seem to continue, so does the recovery of crude oil prices, which will quickly translate into new delivery orders for steel as oil and gas companies look to rebuild their devastated businesses.

Crude oil now trades at $38.52 a barrel as of Friday morning, up 45% on the year, based on U.S. benchmark West Texas Intermediate.

Stressed Out: Introducing Real Money's Distressed Index

Stressed Out: AK Steel Leads Surging U.S. Steelmakers

Stressed Out: Sprint Is Collapsing Under the Weight of Its High-Yield Debt

Stressed Out: Why the Big Steelmakers Are Tanking Today

Columnist Conversations

As far as TSLA is concerned, I still have a higher target above the market at the 409 area.  I stated in ...
The TLT setup discussed in my last commentary is a bust. Key support was violated and it violated the recent l...
BBY is getting smoked this mornings(weak forecast).  The stock is off 8% after opening the session with a...



News Breaks

Powered by


Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.