When nobody wants, you should buy

If I ask you which sector is among the most hated and poorly performed in the past few years, can you tell me? Yes, precious metals are one of them. As I said a few weeks ago, I think precious metals may be turning around. Anything else? Well, that's right, STEEL! The steel industry initially recovered along with the overall market after the US credit crisis in 2009. But the EU debt crisis hit it really hard and since 2011 this sector has never come out of the woods. Of course understandably no one wants to buy steel if the industries using steel are all in the water: housing, car, infrastructure construction etc.

The thing is, the biggest and easiest money is usually made when everyone hates something but the situation becomes a little bit better than expected. I think steel is right at this moment. You see, the economy, even though is still struggling, is slowly improving, even in the Eurozone. The emerging markets, especially China, is also slowly improving. You likely have heard all kind of stories regarding the recovery of the US housing market although I'm not sure we are totally out of the woods yet. In a nutshell, I think the demand for steel will be increasing. It is estimated that the steel price will increase by 3% next year. With this kind of super depressed mode in this sector, a little bit good news may probably make it jump by 20-30%. Actually it seems some early sign of uptrend has already emerged. See United States Steel Corporation (X). I start to establish some positions in steel.