Reliance is hardly a typical steel company

Don't think of Reliance Steel & Aluminum (NYSE: RS) as a steel company; think of it as a 'diversified' metals company, and one that's on sale, at that.

Reliance supplies metal process services and also manufactures metal products for the construction, transportation, aerospace, manufacturing and semiconductor industries.

Reliance is a compelling play now primarily for three reasons: 1) its demonstrated proficiency servicing the aforementioned sectors, 2) the continued strength of the international economy, and 3) the high-end nature of the company's metal products. That last point provides an element of safety for investors: don't think of RS as a classic "basic steel for building foundations" company. Reliance has a multitude of products that are outside the classic (and very cyclical) office building segment. A telling fact: Reliance serves more than 125,000 customers.

Further, the argument among some analysts that above-average prices for steel and aluminum are not sustainable is not supported by current global economic conditions. True, due to the slumping auto industry, U.S. demand may drop, but demand from China and from Asia, in general, remains strong, and Latin America is expected to hold up its end of the bargain in 2008. The Reuters F2007/F2008 EPS consensus estimates for RS are $5.32/$6.02.

The First Call mean rating for RS is: Buy. [8 firms.] Mean 2007 target: $67.50. [high: $77, low: $59.]

Further, investors can receive an added savings as a result of Thursday's market sell-off: RS's shares closed Thursday down $1.60 to $56.75. RS's low p/e of 10 also reduces the stock's risk/return ratio, and it's a modest price to play for such a well-run company with in-demand products.

Stock Analysis: Reliance is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 2 years should be rewarded from RS's shares. Sell / Stop Loss: $39.