ArcelorMittal (ADR) (NYSE:MT)

Improvement in manufacturing and home buidling, leader in the industry. Good value/income play.

The analyis presented by various Motley Fool articles, as well as research I conducted independently, offers a compelling case for ArcelorMittal. Jolted by the stock market especially from July 2011 until late November, MT's stock price decreased by about 50%. However, it remains a strong company. MT is actually earning money, whereas some of its competitors are losing money. MT is working towards becoming a vertically-integrated company--it is not only the world's largest steel manufacturer, but also the world's fourth largest iron-ore manufacturer--which will give MT greater pricing power and more control over its revenues and expenses. Its size gives it the scale and scope to successfully compete on a global scale. Its CEO, Lakshmi Mittal, owns approximately 41% of company shares, so he has a clear interest in ensuring the company's success. Several other statistics Motley Fool writers refer to suggest that MT has the "signposts of solid financial performance": MT had an average return on capital of 14% in the decade ending in 2010, in only one year in the past decade has MT experienced an operating or net loss for the full year, the company's debt-to-equity ratio at the end of 3Q 2011 was 46% compared with that of 704% in 2001, its EBITDA-to-interest expense ration was 6.2 compared with that of 0.2 in 2001. Its price-to-average-10-year-earnings ratio (using 10 years to smooth out the gyrations of a cyclical steel industry) is 7.3. Its dividend yield (of about 3.3%) adds a nice layer of frosting to the cake.

There are certainly many other factors to consider, many of which I have little knowledge of (refer, for instance, to a January 12, 2012 MF article discussing MT's intangible assets ratio and tangible book value). However, based upon this preliminary analysis, it appears as if MT is currently undervalued by Mr. Market and well-positioned for an eventual increase in its stock price. Factors like domestic demand for automobiles and the sovereign debt crisis in Europe might be short-term complicating factors, but I think MT is well-equipped to weather these challenges and maintain its status as a strong, indeed preeminent, vertically-integrated company.