Is it still safe to own shares of Algoma Steel Group (ASTL)?
Nordstern Capital, an investment management firm, has released its third quarter 2022 letter to investors – a copy of which can be downloaded here. In its letter for the first quarter of 2022, the fund pointed out that the third quarter had been disappointing for the fund. There are three main reasons for the fund’s underperformance, but he believes those same three themes that were strong headwinds last quarter are driving its strong performance over the coming quarters and years. Try taking the time to check out the fund’s top 5 holdings to get an idea of their top stock picks in 2022.
In its letter to investors for the third quarter of 2022, Nordstern Capital mentioned Algoma Steel Group Inc. (NASDAQ:ATL) and explained his ideas for the company. Founded in 1902, Algoma Steel Group Inc. (NASDAQ:ASTL) is a subsidiary of Sault Ste. Marie, a Canadian-based steel producing company with a market capitalization of $718.8 million. Algoma Steel Group Inc. (NASDAQ:ASTL) has returned -36.91% year-to-date, while its 12-month returns are down -39.70%. The stock closed at $6.82 per share on November 3, 2022.
Here’s what Nordstern Capital has to say about Algoma Steel Group Inc. (NASDAQ:ASTL) in its Q3 2022 Letter to Investors:
“The world is short of commodities and energy. Nordstern Capital has increased its exposure to commodities and energy. Recession fears may temporarily suppress demand and prices. The fundamental problem, however, is a sustained shortage of supply, caused by a decade Shortages cannot be solved in the short or medium term.
The currently stifled stock prices present a wonderful opportunity for our commodities companies to buy back their own shares. For instance, Algoma Steel Group (NASDAQ:ASTL) reduced its diluted number of shares this year from 177 million to 111 million. Nonetheless, ASTL’s stock price is down 50% as US HRC steel prices per ton fell last year from $2,000 to $713 currently. Today, ASTL has $500 million in net cash and a market capitalization of approximately $700 million. The company is profitable even in the current recessionary environment. The CFO expects annual mid-cycle free cash flow generation in excess of ASTL’s current enterprise value. This is an illustrative example. ASTL is not alone. Many of today’s commodity companies are cash- and profit-rich and can use low stock prices for aggressive buybacks.”
Photo by Russ Ward on Unsplash
Our calculations show that Algoma Steel Group Inc. (NASDAQ:ASTL) fell short and did not make it to our list of 30 most popular stocks among hedge funds. Algoma Steel Group Inc. (NASDAQ:ASTL) was part of 45 hedge fund portfolios at the end of the second quarter of 2022, compared to 42 funds in the prior quarter. Algoma Steel Group Inc. (NASDAQ:ASTL) has returned -26.11% over the past 3 months.
In April 2022, we also shared another hedge fund’s perspective on Algoma Steel Group Inc. (NASDAQ:ASTL) in another article. You can find other letters from hedge fund investors and leading investors on our letters to hedge fund investors 2022 Q3 page.
Disclosure: none. This article originally appeared on Insider Monkey.