We recently published a list of the 15 Small-Cap Construction and Materials Stocks Hedge Funds Are Buying. In this article, we are going to take a look at where Steel Dynamics Inc. (NASDAQ:STLD) stands against other small-cap construction and materials stocks.

Saira Malik, Nuveen’s head of equities and fixed income, joined ‘Closing Bell’ on CNBC on March 26 to discuss her investment strategy in the middle of this uncertain market. She emphasized that two dominant themes are shaping the second quarter of this year: policy uncertainty and questions surrounding the pace of the economic slowdown. Malik noted that markets have shown a little optimism after a rebound from correction territory. This was driven by investor expectations of watered-down tariffs and the return of the term ‘transitory’ regarding inflation effects from tariffs. However, she highlighted that the economy continues to slow. Given this, Malik prefers defensive market sectors, particularly infrastructure. She also identified municipal bonds as a favored fixed-income category.

These appeal to local investors who seek stable income streams in the middle of this economic uncertainty. Malik also acknowledged the risk that continued negative sentiment about consumer weakness could become a self-fulfilling prophecy. She pointed out that the economy’s recent strength has been driven by consumer spending and employment, with about half of payroll growth since 2019 coming from government jobs. The recent data on consumer spending, retail sales, and confidence have been weak, but consumers often express pessimism without reducing spending proportionally. Despite this, she stressed that the economy is slowing and warned that ongoing tariff uncertainty could cause a sharper economic downturn. However, she also mentioned potential upside from forthcoming tax cuts and deregulation, which could provide economic support. Malik explained that the market’s recent optimism comes from increasing clarity about tariff implementation and targets.

Our Methodology

We first sifted through financial media reports, ETFs, and Insider Monkey’s Q4 2024 hedge funds database reports to compile a list of the small-cap construction and materials stocks hedge funds are buying. For this article, we define small-cap stocks as those that trade between $10 billion and $30 billion, as of April 28. We then selected the top 15 stocks and ranked them in ascending order of the number of hedge funds that have stakes in them. In cases where an equal number of hedge funds held two or more stocks, we used the market cap as a tiebreaker.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

A machinist inspecting a freshly-cut steel beam, ready to be shipped to its intended destination.

Steel Dynamics Inc. (NASDAQ:STLD)

Market Capitalization as of April 28: $19.00 billion

Number of Hedge Fund Holders: 45

Steel Dynamics Inc. (NASDAQ:STLD) is a steel producer and metal recycler. It operates through four segments: Steel Operations, Metals Recycling Operations, Steel Fabrication Operations, and Aluminum Operations. The company is heavily involved in the materials and construction industries. Its products are used in markets like construction, automotive, manufacturing, and transportation.

The company’s Steel Operations segment made $230 million in operating income for Q1 2025. This was fueled by a record-breaking shipment volume of 3.5 million tons of steel. The segment had to navigate a tightening of metal spreads in this period, with the average realized external steel price experiencing a $13 per ton dip and the average scrap price climbing by $16 per ton.

The Steel Operations segment also propelled the Sinton facility’s transition to positive EBITDA during the quarter, operating at a commendable average of 86% capacity and frequently surging beyond 90%. 75% to 80% of the Steel Operations’ flat-rolled steel business operates under contracts that lag market fluctuations by ~2 months. This suggests that the recent upward trends observed in flat-rolled steel pricing will potentially exert a positive influence on the segment’s financial outcomes in Q2.

Overall, STLD ranks 6th on our list of the small-cap construction and materials stocks hedge funds are buying. While we acknowledge the growth potential of STLD, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than STLD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.

Disclosure: None. This article is originally published at Insider Monkey.