Thursday, September 01, 2011

Review of Reliance Steel (RS) (Aggressive Growth Portfolio)


Reliance Steel (RS) provides value-added metals processing services and distributes more than 100,000 metal products.

The company has grown profits and dividends at an 14-15% rate and earned a 7-19% return on equity over the last ten years. RS operations were under significant pressure from declining volume and increasing price competition in 2009. However, profits have begun growing again as a result of:

(1) gradual improvement in its core customer base (aerospace and energy) resulting in both rising demand and prices,

(2) expansion of foreign sales,

(3) an excellent cost control discipline.


Negatives:

(1) the lackluster nonresidential construction market is impacting sales of carbon steel,

(2) economic volatility will continue to affect revenues and earnings.

RS is rated B++ by Value Line, has a debt/equity ratio of approximately 25% and its stock yields 1.0%

Statistical Summary

Stock   Dividend    Payout       # Increases     Yield         Growth Rate          Ratio Since 2001
RS         1.0%          8 9%               6       Ind Ave 2.1             5                        27 NA

Debt/ EPS Down Net Value Line Equity ROE Since 2001 Margin Rating
25% 12% 2 5% B++ Ind Ave 26 9 NA 5 NA

Chart

Note: RS stock made a quick recovery off its November 2008 low, surpassing the down trend off its June 2008 high (red line) and the November 2008 trading high (green line). The stock is in a long term up trend (straight blue lines). By late 2009, RS broke its intermediate term up trend and re-set to a trading range (purple lines). The wiggly blue lines are Bollinger Bands. The Aggressive Growth Portfolio owns a 2/3rds position in RS (having Sold Half when the stock hit the intermediate term trading range upper boundary and then Bought some shares back recently). Additional shares would be Added at $35 and shares Sold at $60.





http://finance.yahoo.com/q?s=RS
9/11