Should You Buy Nucor's Rallying Stock?

Nucor (NYSE: NUE) is a large and diversified U.S. steelmaker. Despite being conservatively run, the company can't avoid the cyclical nature of the industry in which it operates. No amount of diversification or financial strength can change steel demand trends or market-driven steel pricing. With its industry weak right now, Nucor's stock has fallen dramatically from its recent highs. But for investors, that could present an attractive long-term opportunity.

What does Nucor do?

Nucor makes steel and manufactures fabricated steel products. It is one of the largest and most diversified U.S. steel companies. There are two key nuances that investors ought to be aware of here. First, Nucor's infrastructure is built entirely around electric arc mini-mills. These facilities use electricity to recycle scrap steel into "new" steel. That technology is, to simplify things, more flexible than older blast-furnace technology, which uses iron ore and metallurgical coal to make primary steel.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Image source: Getty Images.

Blast furnaces can be very profitable when operated at high utilization rates. So during the industry's upturns, companies like United States Steel and Cleveland-Cliffs, which both make heavy use of blast furnaces, can practically mint money. But when steel demand and prices fall, those companies often bleed red ink. Because of the flexibility of Nucor's electric arc mini-mills, it can maintain profitability through all but the worst industry downturns.

On top of this strong core, Nucor has built a business creating products with the bulk steel it produces. It produces things such as building components, computer racks for data centers, and even many of the vital parts needed to support the electrical grid. In short, Nucor to takes the commodity it produces and turns it into higher-margin products that often have more sustainable demand throughout all parts of the steel cycle. All told, Nucor is likely one of the best-run steel mills in the United States, if not the world.

Downturns are opportunities to buy Nucor

But, to reiterate, no steel company can entirely avoid the cyclical nature of its industry. So Nucor's stock tends to swing between periods of material price advances and material price declines. Right now it is in the middle of a decline, with the shares off more than 45% from their early 2024 high. If you look at a long-term chart of the company's share price performance, that drop, while severe, isn't particularly remarkable, historically speaking.

NUE data by YCharts.

This brings us to its recent stock price advance: It's up by around 8% from the low it hit in April. That could have been an inflection point, or Nucor could just be in the midst of another zigzag , and preparing to head lower again. The key here is to think longer term while most other investors are thinking short term.

The chart above depicts the relative magnitudes of the declines from its peak prices that Nucor's stock has experienced over time. The chart below simply tracks the price. Notice that, despite those steep slides, Nucor's stock has trended generally higher over time. That's because management is always reinvesting in the business so that it can grow. It often invests more down during downturns so it can come out the other side of one a better company than when it entered it.

NUE data by YCharts.

When you look at Nucor as a potential investment, the goal shouldn't be to attempt to time the perfect entry point. It should be to get it "about right" and buy when Wall Street appears to be scared. Sure, you'll probably want to wait until its downturn is pretty deep, like it is today. Which hints that now is, indeed, a good point to buy this dominant steelmaker.

The rally could fade, but that's not the way to think about Nucor

Warren Buffett likes to simplify his investment approach to three points: Buy good companies when they appear attractively priced, and then hold them for the long term to benefit from long-term company growth. Nucor appears to fulfill the first two pieces of that formula today -- the third one is up to investors. If you have the fortitude to buy when others are selling, Nucor's price drop could be a buying opportunity. The rally since April could be the start of an upturn or it could be a random price move. Don't get too caught up in that short-term price change, focus on the bigger picture and the long term opportunity that still exists. History suggests that it is better to be about right than miss a buying opportunity in Nucor.

Should you invest $1,000 in Nucor right now?

Before you buy stock in Nucor, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nucor wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $639,271!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $804,688!*

Now, it’s worth noting Stock Advisor’s total average return is 957% — a market-crushing outperformance compared to 167% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of May 19, 2025

Reuben Gregg Brewer has positions in Nucor. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.