Berkshire Bought Nucor Stock. Buffett Will Hope It Works Out Better Than His Last Steel Play.

Steel prices have been boosted by President Donald Trump’s 50% import tariffs on steel and aluminum. (Photo by Roger Ball/Worldsteel via Getty Images)

Berkshire Hathaway bought Nucor stock. Hopefully, this purchase works out better than the last time Warren Buffett dabbled in the steel business.

Shares of the steel maker were up 6.4% in early trading Friday at $153.65 a share, while S&P 500 and Dow Jones Industrial futures were each falling 0.1%.

Berkshire, of course, has an incredible investing pedigree. Buying the shares is a big vote of confidence in Nucor.

There is a lot to like about the company. It’s one of the 20 largest steel makers in the world, growing for decades by pioneering the use of smaller electric arc furnaces, called mini-mills, to melt lower-cost scrap metal.

It’s also an S&P 500 dividend aristocrat, one of the 69 companies in the index that have raised dividends annually for at least 25 years. Nucor stock yields about 1.5%.

Still, it’s a steel company in a tough commodity business that occasionally gets whipsawed by federal policy. That, historically, has meant low valuation multiples and high earnings volatility.

Nucor shares trade for about 13 times estimated 2026 earnings, a big discount to the S&P 500 multiple of about 22 times. The company earned almost $29 a share in 2022, when the benchmark steel price averaged about $1,000 a ton. Nucor made about $8.50 a share in 2024, when steel prices averaged closer to $750 a ton.

Steel prices today are about $830 a ton, boosted by President Donald Trump’s 50% import tariffs on steel and aluminum.

Low multiples are typically attractive to value investors like Warren Buffett. His Berkshire Hathaway bought shares of Korean steel leader POSCO around 2o06, when the company’s stock traded at about 7 times next year’s earnings at the time.

POSCO stock roughly tripled from 2006 into 2007 as steel markets tightened with China’s construction boom in its early innings. Shares, however, gave up all the gains during the The 2008-09 financial crisis. Overall, Berkshire’s POSCO investment turned out OK. Berkshire sold the stock around 2013 and, while exact numbers are hard to come by, it likely earned a single-digit annual return holding shares.

This time, Berkshire is buying at a cyclical low. Earnings are off prior peaks. Still, predicting the path of the steel business has been notoriously hard for decades.

Write to Al Root at allen.root@dowjones.com