To invest in U.S. Steel, you'll need nerves of steel

The onset of the global recession, with its reduced demand for steel, took shares down further, to (incredibly) about $17 per share. Shares have since recovered to the $26-30 range.

The rationale for owning X's shares now? US Steel will likely be a survivor in the consolidating global steel sector with sufficient scale to either produce raw materials or acquire raw material assets. The First Call FY 2009/FY 2010 EPS estimates for X are -$2.91 to $2.31.

Still, both tons shipped and prices per ton are likely to decline through much of 2009, so investors who can tolerate moderate risk should expect a very low return-on-equity from X in 2009. Underscoring: the real gains in X will not occur before late 2009, at the earliest. That said, an above-expectations performance by the global economy in Q2/Q3 will have institutional investors staking claims in X, and it's best to lead or walk in tandem with that pack, hence the cautious Buy rating here.

Stock Analysis: US Steel is a moderate-risk stock. Consider buying a 20% position in X now; then buy another 20% in three months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 40% of your X position in the first half of 2009. Sell/Stop Loss if you were to buy shares in this company: $16.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.