3 Reasons Every Family Office Should Own Shares of ArcelorMittal
ArcelorMittal (NYSE: MT) is the world's largest steel company, and it is a mess.
It expanded at the worst possible time and its shareholders have paid the price. The company's stock plunged during the Great Recession -- from over $100 in June 2008 to under $18 now. It has started to recover, up more than 13 percent for 2013. But there is tremendous potential in both ArcelorMittal and the steel sector, which makes it an ideal investment for a family office.
Entrusted with protecting the wealth, generating current income and beating the future market gains for the affluent family that it represents, ArcelorMittal would not seem to be a suitable candidate for the holdings of a family office. But breaking down its stock into the three objectives of a family offices shows it is a very appealing stock for those needs. ArcelorMittal should meet the goals of family office investing.
It terms of protecting the wealth, it is difficult to imagine ArcelorMittal falling much more. The share price plunged in the economic downturn, but is up more than 30 percent for the last year of market action. The steel sector in general is starting to recover, with assists from the Chinese economy and the automobile industry, so it is difficult to imagine ArcelorMittal going bankrupt.
It is just the opposite happening that should appeal to family offices.
Steel industry stocks such as ArcelorMittal, Nucor Corporation (NYSE: NUE), and AK Steel Holding (NYSE: AKS) are undervalued. As an example, AK Steel Holding is selling at a price-to-sales ratio of 0.14. That means that each dollar of sales is valued at more than an 80 percent discount in the stock price. It is much the same for Nucor Corporation, too. ArcelorMittal is selling at a deep discount priced to the value of its assets (0.39) and the amount of its sales (0.44).
The stock price should increase in the future as the market more efficiently values the shares.
Income is generated by a dividend of around one percent. That was cut, so it should rise again when operations improve.
For a family office, the potential for ArcelorMittal meeting its investing goals are very bullish. Long-term returns should be very for rewarding family offices and other shareholders, as ArcelorMittal continues to recover from the Great Recession.
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