United States Steel: Buy, Sell, or Hold?

If the takeover drama around United States Steel (NYSE: X) has caught your attention, you might want to step back and hit the pause button. Acquisition battles are always uncertain and, sometimes, nothing comes of the news and rumors. Given that U.S. Steel's stock rocketed more than 20% higher because of the takeover talk, there's material downside risk if it all comes to naught. Meanwhile, a lot of potential good news may already be priced in.

United States Steel is an iconic name in U.S. history, let alone in the steel industry. It very literally helped to build the country that you know today. However, it was created at a time when the steel industry used blast furnaces to make primary steel. Blast furnaces are large and expensive to operate. When steel prices and demand are high, they can be very profitable, but when demand and prices are weak, the cost of keeping a blast furnace running generally leads to red ink. In other words, the core of U.S. Steel's business is highly cyclical.