For years, Nucor Corporation (NUE) has been my favorite Basic Materials stock. NUE shares have been in my portfolio since the Great Recession. However, like any other investment, there are times when I believe it’s prudent to trim the position on valuation.
This is one of those times.
Why Nucor?
Nucor Corporation (NUE) is the largest North American mini-mill steelmaker. Nucor uses electric arc furnaces to produce steel. Some other producers, for example, U.S. Steel (now owned by Nippon Steel North America) and Cleveland-Cliffs Inc. (CLF), utilize old-school blast furnaces.
Nucor manufactures steel mostly from scrap. The company, through subsidiaries, operates America’s largest metal recycling business. Nucor is North America’s most diversified steel producer, manufacturing plate, bar, deck, coil, and many other specialty steel products. In recent years, management has focused upon such higher-margin specialty products.
I believe management makes a difference. My view is that Nucor management is the best in the business. They do not lay off workers. Employee safety is integral to the company culture. The company operates exclusively non-union shops. Profit-sharing is part of the annual pay package from the floor worker to the C-suite.
Year-in-and-year-out, Nucor maintains the best balance sheet in the steel business, currently sporting an “A-” credit rating. CEO Leon Topalian frequently calls out Nucor’s outstanding balance sheet. He offered these remarks on the 3Q2025 earnings conference call:
Following the Moody’s upgrade, we are now rated A- or A3 by all three ratings agencies, making us the only major North American steel producer to hold that distinction.
The company “earns its profits in cash,” meaning operating cash flow tends to be equal to or greater than net income. The following ten-year FAST Graph highlights this relationship. The red bars are cash flow. The yellow bars represent net income.
Meanwhile, the board of directors
