Should You Buy BlueScope Steel Shares at This Price?

What happened to the BSL share price?

This week, we saw more fluctuations in the equity markets. They were coupled with large swings in the prices of commodities.

BlueScope Steel Limited [ASX:BSL] is a stock that is constantly moved by the commodities market. Following the energy rebound overnight, BSL recovered 2.18% by midday today.

Why did BlueScope Steel shares do this?

The media is quick to use their new buzzword ‘Brexit’ to explain just about every move in the market. While it is true that ‘Brexit’ continues to create concerns about financial stability and weakening global demand, it has not been the direct market driver this week. Movements this week have been driven by changes in the prices of commodities.

BSL has some degree of correlation to the prices of commodities. However, the BSL stock price started to take off in the mid of 2015, greatly outperforming commodities. Since then, BSL has become a strong momentum stock. It has been on my radar for a while.

Fundamentals have been very helpful to BSL’s surging share price. The company successfully lowered its cost-structure, and is now capitalising on the reflation in commodities. In May, the company lifted its earnings guidance and caused a strong rally in its price.

What now for BlueScope Steel Limited?

BlueScope Steel remains a strong momentum stock. I don’t consider it to just be a steel stock at all at this point. It has vastly outperformed many of its peers, and has generated a certain momentum on its own.

Like a few others in the commodities sector, BSL has survived the last few ‘ugly’ years and emerged stronger, and ahead of the pack. This is precisely the kind of company you want to have a position in right now.

The fact that we are going to see further reflation in commodity prices will only help BSL.

Ken Wangdong
Emerging Market Analyst, New Frontier Investor

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