Stephen Simpson, CFA
Long only, growth at reasonable price, value, research analyst

Gerdau's Correction Seems Overdone

Numerous Brazilian industrial companies, not to mention the Bovespa as a whole, have gotten hit hard since the start of 2014. The prior year was a volatile one as investors became more concerned about slowing growth in Brazil and difficult choices for the government regarding inflation, fiscal stimulus, and infrastructure inadequacies. Weak rainfall has exacerbated the problem, raising the prospect of electricity rationing that could lead to a meaningful decline in industrial output.

The Brazilian steel sector has gotten hit hard, with Gerdau (NYSE:GGB), CSN (NYSE:SID), and Usiminas (OTC:USNMY) down 25% to 40% before a recent bounce. Electricity rationing would be bad news for an already-stressed Brazilian economy, but there is more to Gerdau...

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