At Current Prices, Mittal Is a 'Steel'

This column was originally published on RealMoney on Sept. 22 at 11:06 a.m. EDT. It's being republished as a bonus for TheStreet.com readers.

With all the bad weather of late, it may be time to brace your portfolio with steel.

Over the past year, the public steelmakers have taken investors on a wild run, doubling and better from last fall through the spring, and then tumbling 50% or worse since then. The old cliche about a roller coaster doesn't do these moves justice. It's more like a bungee jump.

Now that the industry has shaken out a lot of the latecomers, though, predictably it has started to move slowly back into black. While Canada-based small-cap Novamerican Steel (TONS) is down 45% in the past six months, it is up 7% in the past three months and 11% in the past month. Likewise, Ohio-based small-cap AK Steel(AKS) is down 35% in the past six months, but it's up 19% in the past three.

The name in the group that I find the most intriguing, however, is Mittal Steel (MT), which not only is much larger than those two, it's twice as large as Nucor(NUE), the biggest American steelmaker.

Mittal is based in the Netherlands and controlled by an Indian family. It may be one of the most truly global companies in the world: It manufactures steel in Algeria, Bosnia, Canada, the Czech Republic, France, Germany, Kazakhstan, Mexico, Poland, Romania, South Africa, and Trinidad and Tobago, and also runs steel-rolling plants in Luxembourg and Macedonia. About 60% of its revenue is generated in emerging markets.

Right now, the stock is about 30% off its all-time high set in March, and appears attractive fundamentally, technically and on valuation. Considering that it is one of the three largest steelmakers in the world, is well-integrated vertically, has a very low cost structure, and should achieve economies of scale going forward, it should probably trade at a premium earnings multiple. And yet it actually trades at a discount -- a paltry four times multiple, vs. the industry average of six times.