Case of CSN: A 120%, 100-day rally no one saw it coming

The curious case of CSN copy


The top stock in one of the world’s best-performing equity markets this year is a star no analyst saw rising.
Cia. Siderurgica Nacional SA, or CSN, Brazil’s biggest steelmaker by market value, has more than doubled in the 100 days since trading began in 2016. The rally came as a shock to analysts who recommended selling the stock at the start of the year and the bondholders who dumped the company’s notes. Even now, CSN is the benchmark Ibovespa index’s worst-rated company, with 13 sell ratings and no buy recommendations, data compiled by Bloomberg show.
Many of the reasons that analysts are so down on the stock are the same motives that prompted asset manager Octante to jump into CSN, said Laszlo Lueska, a partner at the Sao Paulo-based firm that was the biggest buyer of the steelmaker’s shares in the first quarter.
One Octante fund made 18.5 million reais ($5 million) on CSN in the period by betting that a loan renegotiation late last year will be enough to help it avoid a wider debt restructuring.
“CSN has improved its debt profile and we think the company will succeed in its plan to sell assets for a good price,” said Lueska, who helps oversee three funds at Octante. “We’re feeling more comfortable with the company’s prospects. There was an asymmetry between the risks and the steelmaker’s potential gains.”
CSN in September extended the maturity of 4.8 billion reais of debt with Banco do Brasil SA and Caixa Economica Federal to as late as 2022 from 2016 and 2017. The company, is the second-largest listed iron-ore producer in Brazil.

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