Warning: This Skyrocketing Stock Has a Hidden Risk
Over the past six months, the S&P 500 index has risen a touch over 12%. That's not bad for such a short period of time. Shares of United States Steel (NYSE: X) have advanced 103% over the same span. Wow!
There's a specific reason for U.S. Steel's skyrocketing stock price, one that both limits the opportunity for further advances and -- more importantly -- increases the downside risk for investors that buy it now. Here's what you need to know.
The story around United States Steel actually goes back about 100 years ago. Back then, steelmaking technology was less advanced and the company invested heavily in what was then the leading-edge process. However, the blast furnaces that have underpinned the business for years are a feast-or-famine affair, exposing the company to lofty operating costs in what is a highly cyclical business. When steel prices are low, U.S. Steel often bleeds red ink. And when steel prices are high, it can be a cash machine. The swings between the extremes can be brutal.
Source Fool.com
