Gerdau is a Brazilian steel company that specializes in common and special steel rods that are used to construct buildings, homes, electric transmission towers, bridges and other steel-framed structures. Founded in Brazil in 1901, the company now has operations in 14 countries in North and South America. Gerdau was the Editor’s Choice when the company made its only other appearance in Cabot Top Ten Report. That was in June 2008, just as the global market was starting its trip over the falls that bottomed in November. Both revenues and earnings took big hits during the debacle, and interest will be high when Gerdau reports Q3 earnings on November 5. But right now the story is the recovery in the global economy, especially the kinds of infrastructure projects favored by stimulus packages, many of which involve lots of steel rods in the form of rebar to reinforce concrete highway and bridge structures. Investors are clearly banking on a quarterly report packed with good news.
GGB has made a very nice recovery from its November and March lows, but the bigger story in the chart is the time the stock spent gathering its strength from June through September. This led to a blastoff from 13 to 17 in October on good volume. The stock has now spent seven days trading very tightly at 17, building strength for its next move. Investors are likely to be a little wary with the earnings report so close, but aggressive investors may want to take a small position in advance of the report. Otherwise, you should watch the report closely and try to grab a piece soon after the report if GGB’s reaction is constructive.
Buy Range: 15–16.5
Michael Cintolo, Cabot Top Ten Report
