Top Investors’ Stock Portfolio: 5 Small Cap Stocks to Buy

1. Algoma Steel Group Inc. (NASDAQ:ASTL)

Market Cap as of November 4: $770.14 Million

Number of Hedge Fund Holders: 45

Algoma Steel Group Inc. (NASDAQ:ASTL) is a leading North American producer and provider of steel products. Algoma Steel Group Inc. (NASDAQ:ASTL) is one of the stocks that are a part of the top investors’ stock portfolio. Algoma Steel Group Inc. (NASDAQ:ASTL) is profitable, cash-rich, and efficient at making profits for shareholders. The company has a trailing twelve-month operating margin of 37.58% and an ROE of 107.75%. Algoma Steel Group Inc. (NASDAQ:ASTL) has free cash flows of over C$1.19 billion and, as of November 4, is awarding investors with a forward dividend yield of 2.72%.

This September, BMO Capital analyst David Gagliano revised his price target on Algoma Steel Group Inc. (NASDAQ:ASTL) to C$14 from C$16 and maintained an Outperform rating on the shares. On October 20, Stifel analyst Ian Gillies updated his price target on Algoma Steel Group Inc. (NASDAQ:ASTL) to C$10.75 from C$11.25 and reiterated a Hold rating on the shares.

At the close of Q2 2022, Algoma Steel Group Inc. (NASDAQ:ASTL) was a part of 45 investors’ portfolios that held collective positions worth $446 million in the company. As of June 30, Contrarian Capital is the top shareholder in Algoma Steel Group Inc. (NASDAQ:ASTL) and has stakes worth $74 million in the company.

Here is what Nordstern Capital had to say about Algoma Steel Group Inc. (NASDAQ:ASTL) in its third-quarter 2022 investor letter:

“The world is short on raw materials and energy. Nordstern Capital has increased its exposure to raw materials and energy. Recession fears may temporarily suppress demand and prices. The fundamental issue, however, is a sustainable lack of supply, caused by decade-long underinvestment. The shortages cannot be resolved in the short to medium term.

Currently suppressed stock prices offer a wonderful opportunity for our commodity businesses to buy back their own shares. For instance, Algoma Steel Group (NASDAQ:ASTL) reduced its diluted share count this year from 177 million to 111 million. Nonetheless, ASTL’s share price has come down 50%, because US HRC steel prices per ton declined in the past year from $2,000 to currently $713. Today, ASTL has $500m in net cash and a market capitalization of about $700m. The company is profitable even in the current recessionary environment. The CFO expects annual mid-cycle free cash flow generation greater than the current ASTL enterprise value. This is one illustrative example. ASTL is not alone. Many present-day commodity businesses are cash and earnings rich and can use weak stock prices for aggressive buybacks.”

You can also take a look at 12 Biggest Glass Companies in the World and 15 Biggest EV Companies in the World.

Follow Insider Monkey on Twitter