Why Warren Buffett Bet Nearly $1 Billion on Steel — And Why You Should, Too

Warren Buffett’s Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B) has long viewed Nucor (NYSE:NUE) as a cornerstone of value investing. The Oracle of Omaha first scooped up shares in the 1990s, drawn to Nucor’s innovative electric arc furnace technology that revolutionized low-cost steel production. Over decades, this stake has symbolized Buffett’s faith in resilient, cash-generating industrial giants. Nucor, America’s largest steel producer, has rewarded that patience with consistent dividends and market-beating returns, even through commodity cycles. Fast-forward to the second quarter, and Buffett dramatically ramped up his buying of the stock, acquiring roughly 6.6 million shares for about $850 million. While this near-billion-dollar bet might seem massive, it carves out just 0.3% of Berkshire’s sprawling $344 billion portfolio. For Buffett, who’s notoriously selective about materials sector dips — preferring consumer staples and financials — this move stands out. NUE stock has surged 22% year-to-date, handily outpacing the S&P 500. Yet, with shares trading around $143, why is the 94-year-old legend piling in? Buying the Dip, Not the Peak Buffett’s quarterly 13F filings offer a snapshot of trades from the prior three months, not a crystal ball for his current intentions. Berkshire’s Q2 disclosure captured moves from April to June — when NUE plunged to a low of $97 in early April amid steel price volatility and recession fears. From that trough, the stock has rocketed 45%, reflecting renewed investor appetite. Yet, there’s ample reason to see NUE as a bargain even now. Trading at less than 1x forward sales — projected around $34 billion for 2026 — Nucor hovers at historically depressed levels, well below its 10-year average of 1.2x. Its forward P/E sits at about 11.5, elevated from recent troughs but still reasonable given earnings growth prospects. More compelling, the price-to-book ratio of 1.6 marks a multi-year low, trading at a discount to book value per share of $88.83. These metrics scream value in a sector battered by imports and inflation. Nucor’s Strengths Fuel the Fire Nucor’s growth story shines through its operational savvy. As a scrap-metal recycler using energy-efficient mini-mills, it boasts the lowest production costs in the industry — key in a world of fluctuating raw materials. Recent expansions, including a $6.5 billion capex plan through 2027, target high-margin segments like rebar micro-mills in North Carolina and Arizona (both slated for Q3 completion). These will boost capacity by millions of tons, feeding demand from electric vehicles (EVs) and data centers, where steel underpins infrastructure booms. The company also leads in “green steel,” aligning with sustainability mandates. Its direct reduced iron (DRI) facilities are ramping up, promising cleaner production and premium pricing. Its latest earnings report showed resilience as revenue climbed 4.7% year-over-year to $8.46 billion, driven by steel mills, despite a slight earnings dip to $2.60 per share from margin squeezes. Nucor’s fortress balance sheet — it has $5 billion in cash — supported its aggressive stock buybacks and the steelmaker’s 210th consecutive dividend hike to $0.55 per share. Steel’s Broader Revival Industry-wide, U.S. steel is poised for a renaissance. A 50% tariff on imports, enacted in June, shields domestic players like Nucor from cheap foreign dumping, potentially lifting prices 20% to 30%. Hot-rolled coil (HRC) spot prices are up 14% year-to-date with further gains expected. Declining finished steel imports — down 9% so far this year — eases competitive pressure. Macro events amplify this. AI-driven data center construction, fueled by tech giants, demands vast quantities of steel. Industry estimates peg sector needs at 10 million tons annually through 2030. EV mandates and infrastructure needs for roads, bridges, and factories, are Nucor’s sweet spots. Fiscal policy under a pro-manufacturing Trump administration could see corporate taxes slashed, juicing growth further. Even with sticky inflation limiting how much the Federal Reserve cuts interest rates, a surprisingly resilient U.S. GDP at 3.3% supports demand. Globally, geopolitical tensions boost onshoring, favoring Nucor’s U.S.-centric model over volatile overseas rivals. Key Takeaways Nucor remains a compelling buy, blending Buffett’s timeless value principles with steel’s cyclical upside. At current valuations, it’s a steal for patient investors eyeing 10% to 15% annual returns via earnings recovery and dividends yielding 1.5%. Buffett’s $850 million vote isn’t chasing momentum — it’s betting on Nucor’s moat in a tariff-protected, infrastructure-hungry America. With shares up 21% in 2025, but still 17% off its 52-week high, the dip-buying window remains. For growth seekers, Nucor’s EV and green initiatives promise multi-year tailwinds, outshining peers mired in legacy costs. In Buffett’s world, cheap, durable businesses win, and Nucor fits the bill perfectly. The post Why Warren Buffett Bet Nearly $1 Billion on Steel — And Why You Should, Too appeared first on 24/7 Wall St..