Gerdau ( GGB)

Number of Analysts: 8

Average Recommendation: Hold

Stock Price/Earnings Ratio vs. Industry's: 21.04%

Market Cap: $18.7 billion

Trailing Twelve-Month Operating Margin: 13.4%

Trailing Twelve-Month Revenue: $15.22 billion

What's to Like About Gerdau Stock: Albert Meyer, portfolio manager of the Mirzam Capital Appreciation Fund described Gerdau as "a sizeable company with great corporate management" giving the investor exposure to both continents of America -- both North and South America; the company is currently the second largest global producer of long steel. "And they pay generous dividend," Meyer pointed out. The company currently has a yield of about 2.4%.

"You have to believe that life after the recession and economic growth in North America will be restored to pre-Lehman levels -- otherwise you wouldn't buy this steel company," Meyer said. Meyer certainly thinks this is possible. "The global recovery is slow but it's picking up in Brazil.... I do think we'll get back onto our feet in North America and Gerdau will benefit from that. North and South America growth to pre-Lehman levels will boost demand for steel."

Meyer believes that Gerdau stock could double over an estimated five-year time period and that the appreciation may be front-end loaded. "It's certainly given you these types of returns in past seven to ten years."

Meyer said Gerdau has been generating about 40% of revenue from Brazil, about 40% from the U.S. and Canada, about 10% from Latin America and about 10% from Europe, mainly Spain. He added that the company was started in 1901 by the Gerdau family, who still owns more than 70% of the stock. "I know I'm investing in good people." Plus, "the way they compensate executives is modest by U.S. standards. There are no dilutions through options."

Meyer said Mirzam is "a true buy-and-hold fund with 2% turnover and is focused heavily on corporate governance;" and that Gerdau and another company, Southern Copper ( SCCO ) (next page), excels in that space. "And hence the fabulous returns for shareholders over past decade. There is a relationship between shareholders and corporate governance," Meyer said.

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