AK Steel (AKS)

[ak17072001]

The company is due to report quarter earnings on the 29th and "rumors" on major boards as well as the sentiment in the air have it that the earnings and the conference call will be better than anticipated. The F-150 aluminum that many on message boards online explain as to why the AKS price will likely fall again to $3 by summer and/or AKS will go bankrupt is only a small part of AKS's business. It is highly probable after earnings that upgrades from agencies (including Goldman Sachs currently with a price target of $6) will come out. The X upgrade I posted earlier moved the price in one day initially by more than 5%. PT for X is now more than 20% above closing price.

AKS was one of the producers with the highest costs due to legacy costs such as pensions. They are continually negotiating with unions to reduce some of those costs and actively vertically integrating to own the entire steel process process. They will not beat SID on gross margin but they do not have the debt of SID and have much better contracts plus no international risk and a much more beaten down stock from its all time highs.

AKS has some decent contracts in place which are fixed contracts. It is one of the highest quality producers and has won numerous awards over the years. If you go on the company's investors relation page they list one of them, the chrysler sheet metal award.


Lots of steel plants from India to the US have had issues in this past quarter up to and including temporary closure. Think the recent explosion over at X. Who can fill in some supply ? AKS .

To top it off you have China who since August has actively been reducing capacity. China is halting approvals of new constructions of steel plants, some old plants are being dismantled and we have imports protection.

http://news.xinhuanet.com/english/indepth/2013-08/17/c_132638486.htm
http://english.cri.cn/7146/2013/11/21/2702s799806.htm

We have the construction especially in nonresidential ramping up which will ramp up even more toward summer time.

We have a heavily shorted stock with even more shorts added in last few days. Everyone has been "screaming" on message boards, short AKS, RSI of 80+, oppurtunity of a lifetime, will go down to $5-$6, seekingalpha is right they need a major correction, etc.

There is at least anywhere between 30-35 million shares shorted right now and many more were added to short today. With oustanding shares of less than 140 million and almost 45% institutional L/T ownership how will that short covering look like. Rumors have it that those shorts bought January calls at $9 to give themselves some more time to cover and the price to go down after and will not cover in the meantime. Once those calls expire and the price does not drop what will happen I wonder?

There are rumors that AKS will improve its margins by summer time on its upper end steel products yet again.

Overall this looks more like a fundamentals play instead of a chart play with RSI or star patterns. I looked at all your plays and this is the one that got me the most interested. My goal/hope is we see as you predicted over $15 by 03/30/2014. This is important to me on a personal level too, if it does hit $15+ at least by summer if not 03/30 I will very likely be getting married :). Long story.

What are your thoughts (relating to the stock)?