Nucor (NUE)

Nucor remains one of the most admired companies in the steel sector, thanks to its superb management, ability to innovate, unquestionable leadership in the mini-mill steelmaker sector, and its disciplined business model.

Wall Street has soured on the overall steel sector. Just last Thursday, investment banking giant Goldman Sachs Group Inc. (GS) downgraded the sector from "Attractive" to "Neutral." It maintained its "Buy" rating on both Nucor and United States Steel Corp. (X), but removed the latter from its "Conviction Buy" list.

All the technical indicators - as well as the fundamental indicators related to valuation - point to a massively oversold condition in Nucor’s shares specifically, and the steel sector in general. The panic selling that created this oversold condition has created a profit opportunity of which investors should take full advantage.

At current levels, Nucor’s shares feature a very nice dividend yield of 2.64%. The firm, which has paid 141 consecutive quarterly dividends, just declared a "special" dividend of 20 cents a share - in addition to its 32-cent-a-share cash dividend - payable to shareholders of record as of Sept. 30.

Despite a decreasing demand for steel, Nucor is in good position to continue growing its business. The company has a strong balance sheet, a diverse product mix, and a variable cost structure. These factors make it possible for the company to continue growth via acquisitions. For example, Nucor doubled its 3Q profit in 2008 thanks to strong performances from recently acquired steel and scrap-metal businesses.

In addition, the company uses electric arc furnaces (otherwise known as minimills). These allow Nucor to respond better to increases/decreases in demand because they shut down and restart quicker than traditional blast furnaces.

The falling dollar should lead to decreasing foreign steel imports and help drive up domestic steel orders.

Nucor recently began operation of its Castrip facility where strip casting technology is used, a technology which Nucor has exclusive rights in the U.S. This lower cost and lower polluting method could revolutionize the industry.

Nucor has a revolutionary operating model in which nonunion workers are paid incentives based on productivity and performance. Not only has this led to lower costs but Nucor also does not have to worry about negotiations with unions.