X - Get Report) on the firm's "conviction buy" list. Tharani's other "favorite names" include Steel Dynamics ( STLD - Get Report), AK Steel ( AKS - Get Report) and Nucor ( NUE - Get Report). Tharani's argument for his steel bullishness hinged on the sector's share-price "underperformance" relative to the broader market, combined with some recent positive data that would seem to signal a recovery. The analyst believes that steel and scrap prices in the U.S. have bottomed. He noted that Chinese prices are on the upswing, that steel inventories remain low, and that a weak dollar has and will deter steel imports from other countries and thus support prices here. Further, he foresees strong demand in 2010 from automakers and from U.S. industrial manufacturers at large. Tharani cautioned, however, that a seasonal slowdown in the U.S. could weaken domestic steel demand in the near term, and that Chinese steel exports could increase, putting pressure on U.S. steel prices.
"We recommend investors position themselves for the next up-leg in steel as we approach an inflection point of a resurgence of steel and scrap prices," Tharani wrote in a research report. Investors appeared to follow that advice Monday. Shares of U.S. Steel jumped 4% to $44.83. By 10:00 a.m. EDT, nearly 2.4 million shares had changed hands. Average daily turnover in the name totals 11.7 million. Shares of Nucor, meanwhile, gained 1.4% to $42.40; Steel Dynamics rose 1.3% to $16.86; and AK Steel added 2% to $19.93. -- Written by Scott Eden in New York Follow TheStreet.com on Twitter and become a fan on Facebook.