Lead Dog Sell Alert: sell Quanex (NX)

This morning Lead Dog sold portfolio cornerstone Quanex for $50.81 after nearly five years of solid performance: 29% annualized for a 248% total gain.  The tide has turned for Quanex and all steel companies (Lead Dog is down to two such holdings, Nucor and Commercial Metals, after have as many as five in the portfolio at one time) as several factors are now working against them.  Among them:

- Iron ore (used to make steel) prices are booming in dollar terms.  Interestingly, as in the case with oil, most of the price increase is due to the relative weakness of the dollar

- Finished product demand (construction, cars, washers/dryers, etc) will likely curtail until the global economy resurfaces from its current cyclical downturn

- Global competition from developing countries (yep, China, India and the rest of the usual suspects)

Quanex metrics are revealing such weakness: the company missed its latest quarterly earnings estimate, estimates in general are declining (probably with the guidance of company officials) and earnings growth has come to a standstill.  

As much as I dislike the huge associated tax bill on this transaction, one can only assume that the 15% capital gains tax will be short-lived if either democratic candidate is elected president, so 15% now is better than 20% (Clinton) or 24% (Obama) next January.