What a $5.3 Million Sell-Off Means for Worthington Steel Amid 60% Stock Slide

Dallas-based Meros Investment Management fully exited its position in Worthington Steel (NYSE:WS) in the third quarter, as disclosed in its November 14 SEC filing. The move reflects a nearly $5.3 million net decrease.

What Happened

Meros Investment Management, LP disclosed in a Securities and Exchange Commission (SEC) filing dated November 14 that it sold out its entire Worthington Steel position in the third quarter. The liquidation, valued at nearly $5.3 million, removed the position from Meros’s portfolio, which now comprises 43 U.S. equity holdings.

What Else to Know

Top five holdings as of the filing:

• NYSE: DCO: $16 million (6.8% of AUM)
• NYSE: PLYM: $14.6 million (6.2% of AUM)
• NASDAQ: MGNI: $13.4 million (5.7% of AUM)
• NYSE: SEI: $11.7 million (5% of AUM)
• NASDAQ: PLAB: $11.6 million (4.9% of AUM)

As of Friday, Worthington Steel shares were priced at $35.92, down 18% over the past year and well underperforming the S&P 500, which is up 13% in the same period.

Company Overview

Company Snapshot

• Worthington Steel offers carbon flat-rolled steel, tailor-welded blanks, electrical steel laminations, and aluminum tailor-welded blanks to industrial customers.
• The company generates revenue primarily through steel processing, supplying value-added steel products to manufacturers across multiple sectors.
• It serves automotive, heavy truck, agriculture, construction, and energy end-markets throughout North America.

Worthington Steel, Inc. is based in Columbus, Ohio, and operates as a steel processor with a diversified product portfolio, according to company filings. Worthington Steel, Inc. serves a broad range of industrial customers in sectors including automotive, heavy truck, agriculture, construction, and energy.

Foolish Take

Following a difficult multi-year stretch for the stock, Meros' exit matters because Worthington Steel has started to post cleaner, more resilient fundamentals — raising the question of whether some investors are stepping away just as the business is stabilizing after its spin-off. The company’s most recent quarter showed 5% revenue growth to $872.9 million, alongside an expansion in operating income to $48.3 million and net earnings of $36.8 million, all up meaningfully from last year. Meanwhile, adjusted earnings per share climbed to $0.77 from $0.56, highlighting traction in core spreads even as volumes softened in certain categories.

For long-term investors, the liquidation may signal nothing more than portfolio repositioning within a volatile small-cap, especially given Meros’s relatively diversified holdings. But Worthington Steel’s vertically integrated model, strong balance sheet, and recent acquisition of the Sitem Group — now contributing to both volumes — suggest a company still early in its transformation efforts. Dividend continuity and steady margin improvement also give fundamentals-driven investors something to monitor.

Glossary

Exited its position: When an investor sells all shares of a particular holding, fully closing out that investment.
13F reportable assets under management (AUM): The total value of securities a fund must disclose in quarterly SEC Form 13F filings.
Liquidation (of a position): The process of selling off an entire investment holding, converting it to cash.
Portfolio: The collection of investments owned by an individual or institution.
Stake: The amount of ownership or investment a fund or individual holds in a company.
Value-added steel products: Steel products that have been processed or enhanced to meet specific customer requirements beyond basic steel.
Tailor welded blanks: Sheets of metal, often steel or aluminum, welded together to create custom shapes or thicknesses for manufacturers.
Electrical steel laminations: Thin steel layers used in electric motors and transformers to improve efficiency and reduce energy loss.
End-markets: The final industries or sectors that purchase and use a company's products.
TTM: The 12-month period ending with the most recent quarterly report.

Jonathan Ponciano has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Ducommun. The Motley Fool recommends Magnite. The Motley Fool has a disclosure policy.