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My great friend Jr has asked me to do a quick analysis on Gerdau.

is a Brazil-based company engaged in the production and commercialization of steel products. It operates in Brazil, Argentina, Chile, Colombia, Mexico, Peru, the United States, Canada, Spain and India, among others. The Company has 272 industrial and  commercial facilities. Its product line includes roofing, flooring and square nails, as well as wires for the agricultural and construction industries. The Company has various subsidiaries, such as Gerdau Acos Longos SA, Gerdau Acominas SA, Empresa Siderurgica del Peru SA and Gerdau Comercial de Acos SA. On February 21, 2008, the Company acquired a 50.9% stake in Cleary Holdings Corp., which controls coke production units and coking coal reserves in Colombia.

Top Down Analysis Approach

1) Gerdau belongs to the Steel industry. Over 20% of a stock performance comes from it’s industry = how does the Steel industry compare to other industries?

2) What are the top stocks in that industry? We look at them ranked by their fundamentals and price change over the last 3-months and compare to Gerdau

The Steel Industry - the following table is my proprietary rank of industries. Note how the Steel is ranked number 2 and it has been a consistent performer over the 1, 3 and 6-months. Conclusion: Gerdau is in a top industry - check.

The following is the ratio chart of the Steel industry compared to the S&P 500. It basically shows the relative strength of one instrument compared to other. In summary, Steel has started a trend in October 2006 and has been strong since then.

Top Ranked Steel Stocks

Accordingly to my strict stock evaluation system (to be released for public consumption within the next 2 months) Gerdau is ranked # 4 of all the steel stocks.

I have used the letters A+, A, B and B- to classify their technical patterns. Note how AKS and CLF are the strongest (A+), followed by GGB (A) and WOR being the weakest (B-).

Look at how today’s volume was higher on AKS and CLF. In summary, GGB is a good buy and looks well positioned to continue upwards. Good luck to you

My friend asked my opinion on AUY (Yamana) and Gold (Randgold Resources). My first step is to look at the performance for the top highest capitalization Gold Miners… (see chart)

It looks as Randgold (GOLD) has been the strongest player or best performer followed by Barrick (ABX), Goldcorp (GG), Nemmont (NEM) and then Yamana (AUY).

Then I created a daily chart for each stock with the $GOLD contract plotted behind it… just so we get a visual on how the stock has been performing compared to the core contract.

They look similar to me with the exception of NEM which looks a bit weaker than it’s peers.

In conclusion, I’d say GOLD, ABX and GG continue to be well positioned to capitalize on the Gold trend. Volume has been light on the consolidation which is a very good sign.

Most of the Canadian banks stocks have been hit hard by the credit crunch but CIBC seems to be suffering the most. I am sure the long term stock holders and top management officers are in a great deal of pain right now… The following is the monthly chart for the stock… In summary, you hold it for 5 years to make $60 per share, which could make you rich by the way (IF YOU SOLD IT)… then in a couple of months you loose half of everything you’ve made in 5 years… not sure I’m sold on the idea of long term investment… I also wonder if the CIBC Investment advisors have told their customers: Sell our stock

Here is the performance chart for the major Canadian banks:

and here is the second most painful for shareholders

other banks not suffering as much

 
Good fundamentals overall and technically very strong but could face some resistance the top of the channel. I’d buy on the first pullback after bouncing from the top channel boundary.

Conclusion: Fundamentals are slowly improving. Technicals are looking good but very volatile and dangerous. I’d be worried about the 3.4 area. If it reaches that level it could trigger a lot of stops.

Tivo: Fundamentals slowly improving. I really like the technicals on TIVO, strong breakout on volume — something is cooking on this company. Acquision?