Investing

PIMCO is investing in this company 18 June 2009 I have a friend who likes to invest in shares, although it does so in a very particular way: my friend copied the portfolio strategy of investment funds that have managed to better profitability in the last time.My friend’s reasoning is simple: If the investment funds, which usually have a very qualified specialists team and probably handled information privileged quasi, invest in certain enterprises, it is likely that they have a high potential for profitability. For those who act as my friend, probably, a strategy that would not be bad is the attention to those papers in which investment funds observed a potential growth in a medium to long term. Thus, investing in papers with longer-term growth potential, the inverter may acquire them until the best of its growth has passed. There are two very interesting companies to invest already. Click here to find out what. What les I commented above arises from a note I read in America economics where he met the Executive Michael Gomez of the bond fund Pimco, who acknowledged that they are investing in sovereign debt of Brazil, because these bonds are the highest in the world and this is a country that is very well managed, does not have an inflation problemIt has a coin between relatively stable and strong. But Pimco has not only set in the Brazilian sovereign bonds, but has also been in the spotlight in three companies in the country, among which is the Companhia Siderurgica Nacional – CSN-(BVSP:CSNA3; NYSE:SID). CSN is the second steel company of Brazil and the first producer of flat steel, which has a capacity of annual production of 5.6 million tons and generated 16,000 direct jobs. The company has international operations, beginning its process of internationalization in 2001 through the purchase in the U.S. Heartland Steel. Leveraging the advantages, the firm operates currently in different market segments such as automotive, civil construction, containers, appliances, among others. After seeing this note, I searched the graph of its SARD to see its evolution, and found that it is observing an upward trend since the beginning of February this year. Papers of the company did not have a good day on yesterday and closed at $22,34, far from US $51, from May 2008. However, the current value of the ADR away lies the growth potential that can reach the company. Depressive economic context, it has been affected by the strong impact of the crisis has been particularly in the sector, but recent signs of global economic recovery hopes increase. The depression of the international scene was reflected in the company’s results during the first quarter of the year. The gross operating profit (EBITDA) of Q1 2009 was 681 million reais ($ 323,3 m), representing a 47% drop compared to figures for the first quarter of 2008. This sharp decline has other extenuating circumstance that CSN is recording a record in 2008, its net profit R $ 5.8 billion (US $2.529 million), double the figures for 2007. On the results of the first quarter of 2009, the brokerage Brascan said in BNamericas: since 2006 have not observed a less than 30% Ebitda margin. The reason for this result for Brascan is: this weakening of the operations is a direct reflection of the low demand for steel products. For the consultant, from such a result will be a gradual and continuous improvement every month demand that recompose the results of the signature. The expected recovery in demand for steels represents good news for the prospects of profitability of the company to which is added the decision to impose tariff measures the Brazilian Government and the end of a dispute which maintained with Vale (sao:VALE3; NYSE: VALE). Recently in Brazil decided measures tariff on steel imports that have a positive effect on the companies in the country, as CSN. Lula’s Government decided to cede to the pressures of the local industry, reimposing tariffs ranging from 12% to 14% on imported steel products. These had been eliminated in 2005. Last may, CSN managed to finish a dispute initiated by the exploitation of the mine stone house, in a negotiation than with benefits for both in 2000 by Vale, and according to which shall be at the discretion of Vale suspend or definitively cancel a contract until end of this year, to buy ore produced by Casa da Pedra. The agreement foresees also the supply by Vale of up to 3 million metric tons of pellets of iron to CSN between 2009 and 2014. In what refers to the company’s strategy in these times of crisis, it has prioritized kept liquid at least until uncertainty in the markets. In this sense, CSN made a strategic sale of 40% of the shares of national ore S.A. – Namisa- (Brazilian production company of iron ore, a subsidiary of Siderurgica CSN), to a consortium with companies in Japan and South Korea. In the same line of maintaining financial strength for this year, and considering the weakness of demand that will see a slow and gradual recovery and that will limit the volume of income, CSN has limited their investment projects to the continuity of which are already underway. At the moment, CSN has postponed the project of entering the market of long steels (the specialty of CSN are flat steels), scheduled for 2010. The construction of two new steel, one in Itaguai (Rio de Janeiro) and another in Mina Gerais was also postponed. Yes it was confirmed the continuity of investments for the construction of a cement factory. Perhaps one might think that the decision to postpone investments in steel sector represents a step backwards for the company. However this is not so since global demand is very depressed and will take a long time to resume normal, so it is not advisable on installed production capacity to expand to a current oversupply for the situation. Test of excess capacity of existing production at the global level, a friend of mine who works in a steel leader in Argentina, told me in China around 90% of steel plants are stopped, given the weak demand. Thus, in the immediate term, this Siderurgica argentina benefited from demand for steel from China that exceeds the production carried out active plants, but this situation is not sustainable in the medium term since many plants that are inactive like these from China will restart with the recovery of the global economy. To synthesize, Pimco sees a company that is well positioned in a market that while it is depressed, is in its phase of gradual recovery in CSN. On the other hand, the business strategy of the company allowed to speed recovery of their profitability compared to other companies in the sector.

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