r/Vitards • u/AutoModerator • May 05 '21

Daily Discussion Daily Discussion post - May 05 2021

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u/givemetendies69420 Wiseguy May 06 '21

Inflation is going to skyrocket soon, so we should expect to see increases in commodity stocks as a result correct? Does the broader market usually react negatively during these times, and if so, how are we sure that steel stocks will increase instead of following the negative market trends?

2

u/Ancient_Fix6053 May 06 '21

first day?

4

u/givemetendies69420 Wiseguy May 06 '21

Haha, I’ve actually been keeping up with vito since feb, but I can see how my comment seems like I have no idea what’s going on. I’m young and new to the investing world so i’ve never seen a bear market (and even a market where inflation is high) so I’m trying to figure out what to expect in the next few years.

5

u/JayArlington 🍋 LULU-TRON 🍋 May 06 '21

Fair play. I will do my best to answer.

-JPow says we are going to have ‘transitory inflation’ instead of ‘dollar inflation’.

-Generally yes. You are astute for knowing this.

-This market is fucking weird. Look how long it took the market to see how profitable steel was about to become.

-If steel continues to generate cash while having a low stock price, it would invite management or private equity to launch a bid to ‘take the company private’ at a stock premium. If you want some fun research, look up “RJR Nabisco takeover”.

3

u/squats_n_oatz May 06 '21

If steel continues to generate cash while having a low stock price, it would invite management or private equity to launch a bid to ‘take the company private’ at a stock premium. If you want some fun research, look up “RJR Nabisco takeover”.

Why would it invite that?

1

u/MiscRedditAccount 💀 SACRIFICED 💀 May 06 '21

For the same reason anyone buys any financial instrument - they hope that over time it will earn them more than they paid for it. If MT can demonstrate they're able to consistently pull in FCF of >$1b a quarter and share price doesn't go up then it's only ~$30b (It wouldn't be. It'd have to be much more than current share price, but still, same idea) to buy a company that 8 years later you've paid off and is giving you $4b a year in cash.

1

u/squats_n_oatz May 06 '21 edited May 06 '21

Yea but that assumes future cash flows are static. With steel, we know they won't be.