The next time you are stuck in traffic on the Santa Monica Freeway, you might amuse yourself by recalling that much of the steel in that mass of vehicles was made by an outfit headquartered in Middletown, Ohio.

AK Steel Holding Corporation (NYSE: AKS) produces carbon, stainless and electrical steel products. The firm makes cold-rolled and aluminum-coated stainless steel for automakers, provides energy efficient electrical steels to makers of power transmission and distribution equipment, and sells hot- and cold-rolled carbon steel to construction companies, automakers and industrial machinery producers. It also manufactures carbon and stainless steel tubular products and makes antimicrobial coated steels for appliances. The firm has major plants and offices in Ohio, Indiana, Kentucky and Pennsylvania. Clients include Ford Motor (NYSE: F), General Electric (NYSE: GE), General Motors (NYSE: GM) and Toyota Motor (NYSE: TM). Competitors include U.S. Steel (NYSE: X) and Nucor (NYSE: NUE).

The stock is up more than 30% over the past month, on news of a solid first quarter earnings report and takeover talk. The latest rumor involved last week's speculation that Arcelor-Mittal (NYSE: MT) might be sizing the company up as a potential acquisition. The possibility was actively debated in the press and that prompted a remark by the AK Steel CEO that management is "not actively seeking to sell the company." Still, the steel industry is in a consolidation phase and Arcelor-Mittal is said to be interested in bolstering its U.S. presence. The stock popped on the takeover rumor and has since been defining a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the shares with one "buy," five "holds" and two "sells." The AKS Price to Sales ratio (0.60), Sales Growth rate (19.78%), EPS Growth rate (983.33%) and Revenue per Employee ($907.57k) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 95% of the outstanding shares. Over the past 52 weeks, the stock has traded between $11.11 and $37.70. A stop-loss of $29.30 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.

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