Is More Than A 2x Rise In ArcelorMittal Stock Justified?

ArcelorMittal stock (NYSE: MT) has more than doubled in the last six months, registering a rise of 112% in 126 trading days, which we believe is completely justified. MT stock, which now trades close to $30, saw a healthy rally over recent months due to recovery in global steel prices. The lifting of lockdowns over recent months and successful vaccine rollout has led to expectations of healthy growth in shipments in 2021 as demand gets back on track and supply constraints are reduced. Also, the U.S. raw steel capacity utilization for the week ending 10th April 2021 was 77.6%, which is significantly higher than the 55.4% recorded in the prior year period. This is also a marked improvement over the 51% utilization in the beginning of May 2020, which indicates that there are signs of a strong rebound in activity in the steel sector. But will ArcelorMittal’s stock continue its upward trajectory over the coming weeks, or is a correction in the stock more likely?

According to the Trefis Machine Learning Engine, which identifies trends in a company’s stock price data for the last ten years, returns for MT stock average close to 14% in the next three-month (63 trading days) period after experiencing 112% rise over the previous six-month (126 trading days) period. Notably, the stock is likely to outperform the S&P500 over the next three months, with an expected return which would be 12% higher compared to the S&P500.

But how would these numbers change if you are interested in holding MT stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning to test MT stock chances of a rise after a fall and vice versa. You can test the chance of recovery over different time intervals of a quarter, month, or even just one day!

MACHINE LEARNING ENGINE – try it yourself:

IF MT stock moved by -5% over five trading days, THEN over the next 21 trading days, MT stock moves an average of only 0.5 percent, which implies a return which is 1% lower than that of the S&P500.

More importantly, there is 49% probability of a positive return over the next 21 trading days and 44% probability of a positive excess return after a -5% change over five trading days.

Some Fun Scenarios, FAQs & Making Sense of MT Stock Movements:

Question 1: Is the average return for Arcelor Mittal stock higher after a drop?

Answer:

Consider two situations,

Case 1: Arcelor Mittal stock drops by -5% or more in a week

Case 2: Arcelor Mittal stock rises by 5% or more in a week

Is the average return for Arcelor Mittal stock higher over the subsequent month after Case 1 or Case 2?

MT stock fares better after Case 2, with an average return of 0.4% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 1.5% for Case 2.

In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.

Try the Trefis machine learning engine above to see for yourself how Arcelor Mittal stock is likely to behave after any specific gain or loss over a period.

Question 2: Does patience pay?

Answer:

If you buy and hold Arcelor Mittal stock, the expectation is over time the near term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.

Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!

For MT stock, the returns over the next N days after a -5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:

Question 3: What about the average return after a rise if you wait for a while?

Answer:

The average return after a rise is generally lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks – although MT stock appears to be an exception to this general observation.

MT’s returns over the next N days after a 5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:

It’s pretty powerful to test the trend for yourself for Arcelor Mittal stock by changing the inputs in the charts above.

While MT stock may have moved a lot, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how the stock valuation for Compass Minerals vs Southwest Gas shows a disconnect with their relative operational growth. You can find many such discontinuous pairs here.

See all Trefis Price Estimates and Download Trefis Data here

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