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NUCOR
CORP
 
About The Company

Market Cap 14.5B
Revenue (FYR) $15.8B
EPS (TTM) $.42
Shares Out. 316M
Book Value $22.25
Div/Share $1.45
Payout Ratio 346.5x
P/E 100x
P/Cash Flow (TTM) 18.4x
Operating Margin 1.69%
Debt To Capital 37.29%
Gross Profit Margin 5.32%

Nucor specializes in the sale of steel and related products in North America. Unlike other steel producers, Nucor has not cut its dividend but increased it for 37 years in a row.  

 

 

 
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  NUCOR CORPORATION  (NUE) - 2009 - 2010
ONGOING EVALUATION & TRADE
My original goal back in 2009 for NUCOR was to own shares around the $30 to $35 range. Back in the Spring and Summer of 2008 this stock was trading between $70 and $80. Since then it has fallen dramatically and still not recovered. Should the economy recover in 2010 I hope this stock will move to the $60 range. Nucor Corporation is very well managed and they will spend a lot of 2010 trying to keep costs down. Whether or not they can increase their dividend this year, remains to be seen. Nucor has increased their dividend for 36 straight years. However earnings are terrible. There is just no other word for it. This stock bears watching. Volatility is so high that premiums are excellent which is why I am selling naked puts on it.
NUCOR TRADES BY YEARS
VIEW NUCOR 2011 TRADES
VIEW NUCOR 2010 TRADES
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Should you find my strategy and ongoing evaluation of this trade of value I hope you will consider a tip for the time I spend detailing out this trade. I have set up a Paypal account for those who would like to donate. Thank you in advance. Remember, nothing on my site is financial advice. They are just my ideas and opinions. Investing is risky and losses can be large. Trade at your own risk. Read the terms of use

 

 

YEAR 1: 2009 - Trade Commenced Dec 11 2009
Goal for 2009: 1% (1 months)
Strategy: Sell Naked Puts Until Assigned
 
Capital In Use At End Of 2009 39,000.00
Income Earned in 2009 (5 months) 2128.75
Return On Capital in 2009 (5 months) 5.4%
   
YEAR 2: 2010
Goal for 2010: 12%
Strategy: Sell Naked Puts and Avoid Assignment
 
Capital In Use At End Of 2010 34,500.00
Income Earned in 2010 4652.25
Return On Capital For 2010 13.25%
 

 

 

YEAR - 1 2009 and 2:  2010
TRADE COMMENCED Dec 11 2009
GOAL FOR 2010: 12%

ONGOING STRATEGY - SELLING NAKED PUTS UNTIL ASSIGNED

 

Dec 11 09 42.15 STO (Sold) 5 Puts Dec 41 @ .42       13.25     196.75 196.75
Dec 11 09 42.15 STO (Sold) 5 Puts Apr 37 @ 1.85       13.25     911.75 1108.50

Dec 2009 Looking at the above chart, you can see that Nucor is presently (as of Dec 2009) in a trading range. If the recovery does not take hold this stock could fall below 30.00. But for selling naked puts this stock has lots of volatility and the corporation management is excellent. They have retained their top credit rating, and managed to reduce costs significantly.

 

 

Dec 18 09 43.83 Expiry: 5 Dec 41 Puts Expired                
Dec 21 09 43.97 STO 5 Puts Jan 43 @ 1.25       13.25     611.75 1720.25
Dec 24 09 47.10 BTC 5 Puts Jan 43 @ .20       13.25     (113.25) 1607.00
Dec 24 09 47.10 STO 5 Puts Jan 45 @ 1.55       13.25     761.75 2368.75
    END OF 2009 - INCOME - $2128.75                
Jan 6 10 49.55 BTC 5 PUTS APR 37 @ .40       13.25     (213.25) 2155.50
Jan 6 10 49.55 BTC 5 PUTS JAN 45 @ .08       13.25     (26.75) 2128.75
Jan 7 10 48.95 STO 5 PUTS FEB 45 @ .80       13.25     386.75 2515.50
Jan 25 10 44.88 BTC 5 PUTS FEB 45 @ 1.30       (13.25)     (663.25) 1852.25
Jan 26 10 42.85 STO 5 PUTS FEB 41 @ .80       13.25     386.75 2239.00
Feb 4 10 39.50 BTC 5 PUTS FEB 41 @ 2.00       13.25     (1013.25) 1225.75
Feb 4 10 39.50 STO 5 PUTS MAR 41 @ 2.95
COMMENTS: SINCE STARTING THIS TRADE I HAVE GENERATED 12.7% in 3 months. Starting in March I will double the number of naked puts I am selling and move from 21,000 in capital to 42,500 in capital to use for positions in this stock.
      13.25     1461.75 2687.50
Mar 19 10 44.30 STO 5 PUTS APR 42 @ .75
Today is expiry. I am sure the Mar 41 will expire so I am taking advantage of today's weakness to sell the 42 which is where this stock was in December.
      13.25     361.75 3049.25
Mar 19 10 44.39 Expiry: 5 NP Mar 41 expired                
Mar 23 10 45.94 STO 5 PUTS May 43 @ 1.27
Comment: I am selling the May 23 and I have an offer in to BTC my Apr 42 @ .10. Presently it is trading at .28.
      13.25     621.75 3671.00
Mar 29 10 45.80 STO 5 PUTS May 43 @ 1.04
Comments: Still not able to BTC my Apr 42 @ .10 or so, however this stock continues to present good premiums so I have sold another 5 put contracts for May 43 while waiting for the April 42 to either expire or reach 10 cents or lower.
      13.25     506.75 4177.75
Apr 6 10 47.64 BTC 5 NP Apr 42 @ .03       13.25     (28.25) 4149.50
Apr 6 10 47.64 STO 5 PUTS MAY 44 @ .83       13.25     401.75 4551.25
May 10 10 46.65 BTC 5 PUTS MAY 44 @ .42
Comments: With today's big rally, I have closed the closest put to the present price and held the $43 strike.
      13.25     (223.25) 4328.00
May 20 10 43.85 BTC 10 NP MAY 43 @ .80       19.50     (819.50) 3508.50
May 20 10 42.88 ST0 5 NP JUN 40 @ 1.25       13.25     611.75 4120.25
May 21 10 42.10 STO 5 NP JUN 35 @ .40       13.25     186.75 4307.00
Jun 18 10 41.49 Expiry: 5 NP JUN 40 and 5 NP JUN 35 expired                
Jun 23 10 40.95 STO 5 NP JUL 39 @ .68       13.25     326.75 4633.75
Jun 29 10 39.44 BTC 5 NP JUL 39 @ .88       13.25     (453.25) 4180.50
Jun 29 10 38.45 STO 6 NP AUG 36 @ 1.30.
Comments: The stock today touched the 52 week low. With concerns that China may be slowing down, the belief is the demand for steel will decline and thereby Nucor will see lower earnings. It was a simple choice to buy back the Jul 39 Puts and roll to August 36 for a nice credit. Meanwhile I increased my contracts by 1 as at 36.00, Nucor would be a great buy. In March 2009 this stock got down to around 31.00, so it is definitely possible to see it there again, but I don't believe this will be by August. Can you see the pattern here? I started this trade in December 2009 and still have no shares put to me. Meanwhile I have made $4946.00 while the total capital at risk is 16654.00. If the dividend stayed at 1.44 and I was assigned at 36.00 - my dividend yield would be 4.0%, which is quite acceptable. I believe though I will be rolling these puts and hopefully may pick up some shares around 32.00. We shall see what the fall of 2010 brings in the way of selling.
14.50     765.50 4946.00

Jul 29 2010 Looking at the chart I can see that this stock is going to have a tough time getting into the upper $40.00 valuations for some time. The economy must prove to investors that there is no double dip recession and that deflation will not occur. Despite strong earnings, the market is not buying into any recovery in steel companies yet. By selling the 36.00 strike I hope to stay far enough out of the money to give myself enough time to roll out or roll out and down should the stock fall further. Imagine, I have friends who bought this stock in spring 2008 in the 78.00 range. They continue to hold it and there is no convincing them to look at options to help bring in some capital to reduce their overall positions. Meanwhile though they are scared to add to their positions to average down as they believe the stock could collapse further. If you look at the chart on Nucor at the top of this page I believe my friends may have a long wait for this stock to recover to the upper 70 valuations - probably years! Meanwhile option premiums remain good on this stock.

 

 

Jul 29 10 39.41 STO 4 NP SEP 36 @ .68       12.00     260.00 5206.00
Aug 20 10 38.37 Expiry: 6 Naked Puts Aug 36 expired                
Aug 20 10 38.37 STO 3 Naked Puts OCT 33 @ .55       10.75     154.25 5360.25

Sep 14 2010  Nucor released the following on its earnings projection. Stock falls over 3%.

Nucor Announces Guidance for Its Third Quarter Earnings (prnews)

CHARLOTTE, N.C., Sept. 14 /PRNewswire-FirstCall/ -- Nucor Corporation (NYSE: NUE) announced today guidance for its third quarter ending October 2, 2010.  Nucor expects third quarter results to be in the range of $0.05 to $0.10 per diluted share, compared to earnings of $0.29 per diluted share in the second quarter of 2010, $0.10 per diluted share in the first quarter of 2010 and a loss of $0.10 per diluted share in the third quarter of 2009.  Excluding LIFO, third quarter performance is an improvement over the first quarter but down significantly from the second quarter due to lower margins caused by higher scrap costs and the inability to pass along these price increases.  Projected third quarter results include an estimated LIFO charge of $67 million compared to charges of $24 million and $67 million in the first and second quarters of 2010, respectively, and a credit of $120 million in the third quarter of 2009.  The estimated quarterly LIFO charge is higher than the charge of $45.5 million anticipated at the time we gave our qualitative guidance.

We stated in our qualitative guidance given in late July that ?the continuation of the upward trend experienced through the first half of the year is by no means clear at present.  There is a general slowdown taking place across all product lines as the overall economy has entered into a new period of uncertainty.?   Our third quarter results will unfortunately confirm these concerns, and a general slowdown has indeed occurred from second quarter, particularly in our flat rolled business.

As expected, the most challenging markets for our products continue to be those associated with residential and non-residential construction, which continue to show little, if any, strength.  This is particularly true for our downstream businesses.

Nucor and affiliates are manufacturers of steel products, with operating facilities primarily in the U.S. and Canada. Products produced include: carbon and alloy steel -- in bars, beams, sheet and plate; steel joists and joist girders; steel deck; fabricated concrete reinforcing steel; cold finished steel; steel fasteners; metal building systems; light gauge steel framing; steel grating and expanded metal; and wire and wire mesh. Nucor, through The David J. Joseph Company, also brokers ferrous and nonferrous metals, pig iron and HBI/DRI; supplies ferro-alloys; and processes ferrous and nonferrous scrap.  Nucor is North America's largest recycler.

Certain statements contained in this news release are ?forward-looking statements? that involve risks and uncertainties.  The words ?believe,? ?expect,? ?project,? ?will,? ?should? and similar expressions are intended to identify those forward-looking statements.  Factors that might cause the Company?s actual results to differ materially from those anticipated in forward-looking statements include, but are not limited to: (1) the sensitivity of the results of our operations to prevailing steel prices and the changes in the supply and cost of raw materials, including scrap steel; (2) market demand for steel products; (3) energy costs and availability; and (4) competitive pressure on sales and pricing, including pressure from imports and substitute materials.  These and other factors are outlined in Nucor?s regulatory filings with the Securities and Exchange Commission, including those in Nucor?s December 31, 2009 Annual Report on Form 10-K.  The forward-looking statements contained in this news release speak only as of this date, and Nucor does not assume any obligation to update them.
---------------------
MY COMMENTS: Nucor has traded in a range since January 2009. Only once did it break lower out of the range, during the panic of March 2009. Aside from that it has had a great trading range, which has allowed me to easily sell naked puts. The last move to the low end of the trading range did not see a move higher. This could signal the start of a new trading range or a challenge to the low end and a pullback to the $36.00 range. The news today from Nucor pushed the stock down more than 3% and has given me an opportunity to garner some great premiums. I have increased my capital for this stock from roughly 28,000 to 34,500 allowing me to sell 10 contracts in total. Yet my break even in the stock has only moved from 27.05 to 28.00 due to the significant gains of the put premiums. This has allowed me to set up my naked put in the event that the trading range changes to 30.00 to 36.00 which might occur. However I believe there will be no "double dip" recession and as such I believe Nucor by January will be back up to the low end of the more dominant trading range - 39.00 to 48.00.

 

Sep 14 10 39.53 BTC 4 NP Sep 36 @ .04       12.00     (28.00) 5332.25
Sep 14 10 38.85 STO 5 Naked Puts JAN 36 @ 1.90   5.1%   13.25     936.75 6269.00
Sep 14 10 38.85 STO 2 Naked Puts Jan 33 @ 1.20   3.6   9.50     230.50 6499.50
Sep 17 10 38.74 BTC 3 Naked Puts Oct 33 @ .11   (0.30)   10.75     (43.75) 6455.75
Sep 17 10 38.74 STO 3 Naked Puts Jan 33  @ 1.12   3.3   10.75     325.25 6781.00

END OF 2010 - TRADE CLOSED IN JAN WITH OPTIONS EXPIRY - Income - $4652.25 = 13.48%

NUCOR TRADES BY YEARS
VIEW NUCOR 2011 TRADES
VIEW NUCOR 2010 TRADES

 

Disclaimer: There are considerable risks involved in all investment strategies. Trade at your own risk.
Stocks, options and investing are risky and can result in considerable losses. None of the strategies, stocks or information discussed or presented are financial advice, trading advice or recommendations. Fullyinformed.com is a private website. Everything presented and discussed are the author's ideas and opinions only.
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