OT: PKX

In 2013-2015, I followed Munger into this stock, eventually sold at $57 after buying at 80ish.

Eight years later the stock is trading at 47. They just announced buy back for the first time in 18 years and will “guarantee” a dividend of at least 3% going forward. Nothing is guaranteed of course but the company makes an essential product and doesn’t have much debt. It’s also trading at PE close to 3

Anyone has any insights/options about it?

In 2013-2015, I followed Munger into this stock, eventually sold at $57 after buying at 80ish.

Eight years later the stock is trading at 47. They just announced buy back for the first time in 18 years and will “guarantee” a dividend of at least 3% going forward. Nothing is guaranteed of course but the company makes an essential product and doesn’t have much debt. It’s also trading at PE close to 3

Anyone has any insights/options about it?

I’ve never looked into POSCO Holdings before. Thanks for bringing it up. Looks like it’s in deep value territory: per aaii.com it’s trading at .36 times book, 2.7 PE, and 9% dividend. ~$17 billion market cap, with cash ~$4.4 billion and total equity of ~$40 billion. Positive net earnings and operating cash flow each of the last 7 years, and positive net cash flow the past 5 years. Prior to blowout earnings in the last 12 months, per share earnings were quite a bit lower ~$4/share instead of ~$18/share the last 12 months.

I have no idea what led to the huge increase in earnings in the last year or if it would be remotely sustainable, I’m guessing not, but if it reverts to ~$4/share then that’s about PE 12, pretty low, but probably about right for a very slow/no grower.

Interested to hear more of your thoughts about it. Is it an ADR? South Korean based business whose main business is steel production, but has a wide variety of businesses. From the summary at aaii.com:

“The Steel segment produces and sells steel products such as hot rolled steel, cold rolled steel, stainless steel, among others. The Trading segment engages in the global trade, including the export and import of steel products. The Engineering and Construction (E&C) segment plans, designs and builds industrial plants, civil engineering projects, commercial and residential buildings. The Other segment is engaged in the power plants, information and communication related services and other businesses.”

1 Like

Yes, it’s an ADR. Was a munger favorite but he sold most at a lose, though still keeping some.

They supposedly have one of the more efficient technology of producing steel. They get hurt whenever China produce more steels.

Like you said, it’s very cheap, and not leveraged… That’s why I bought it…

well, also because most stocks I sold became multi bagger later. So I am buying the stocks I sold :slight_smile:

1 Like

I have no idea what led to the huge increase in earnings in the last year or if it would be remotely sustainable, I’m guessing not, but if it reverts to ~$4/share then that’s about PE 12, pretty low, but probably about right for a very slow/no grower.

Likely due to steal price spike in 2021, which has since come down and PKX earning will go back to prior 2020 level. https://tradingeconomics.com/commodity/steel

Is this the company website? http://posco.com/

European smelters are shutting down due to high energy cost, and China is limiting electricity usage recently due to high heat, might be good for steel prices…

I would rather buy CLF than PKX. But YMMV.

European smelters are shutting down due to high energy cost…

As an aside, this is particularly true in non-ferrous metals in Europe.
Multiple aluminum and zinc smelters are shutting down permanently.
The exact opposite of policy for more strategic autonomy, alas.

Jim

11 Likes

Multiple aluminum and zinc smelters are shutting down permanently.
The exact opposite of policy for more strategic autonomy, alas.

It’s always sad to see someone committing suicide.

In the case of Germany…well the Germans have a word that somewhat fits—schadenfreude.
Or maybe the English word comeuppance (deserved fate).
They were warned and they laughed at the one giving the warning.

3 Likes

If there is a way to make a 50 year bet, I will short Europe and go long on Asia.

Steal is a commodity just like oil. Manufacturers compete on cost. PRK’s major competitors are not Europeans, but Asians, mainly Chinese.

It is not labor intensive, but energy intensive. If you can produce cheap energy, then you can produce steel cheaply. Europe gave up on cheap energy.

Western world has to rethink about nuclear energy. Renewables are great, but they are not the only solution.

3 Likes