Aug 04 2008
Agreeing with Buffet - Posco is good for the long haul
Some time after I had sold out my shares in Posco steel (PKX), the price dropped from 135 down to just under 120. Not too much later, Warren Buffet bought a bunch of shares in this Korean steel maker, lauding the terrific business practices of the management.
Since then, the stock numbers have not really grown much It has hovered around the $125 mark. Why? Mostly for a couple of reasons. First, the price of iron ore has steadily risen. Second, the amount of construction worldwide is bound to take a bit of a drop. Most of the construction in China needs to be wrapping up as the Olympics are almost on. Of course, building anything in the U.S. is way down. So the call for steel may lessen a bit. Saavy stock pickers are waiting to see how steel consumption will affect the stock price.
But the financial numbers look very good. Revenue have risen steadily in the past decade, the P/E ratio is under 12. And the cash flow is healthy. No wonder Buffet likes it.
Only one aspect about PKX gives me pause. There’s no insider trading at all. I like it best when the company leaders are picking up the stock. Usually it tells me that they expect some upward movement.
So is Buffet on to something? Well, judging from Buffet’s history of picking winners, you’d have to wonder why anyone would even question his judgement. He is super patient, willing to hold good stocks forever. So if you are that kind of investor, this seems to be as good a time as any to pick up this stock and patiently hold it. Just be patient. Seeing good growth could take a while.
