The bottom line is that what we have seen is panic selling due to tax strategies and hedge-fund liquidations. This is due mainly to very poor hedge fund performance this year, which is prompting the liquidation and dissolution of some.

There’s also selling by hedge-fund managers who wish to take advantage of this year’s low capital-gains taxes, since investors dread the possibility of having to pay much higher tax rates next year, should a Barack Obama administration take the White House in this November’s presidential election.

Hedge fund selling not only affects stocks – it affects currencies, too. And hedge fund moves have contributed to the recent rally in the U.S. dollar.

This dollar strength has helped stoke fears that U.S. steelmakers would lose their cheap-dollar competitive advantage over foreign steelmakers, especially those from Asia.

Even on Wall Street, however, a few players have been shrewd enough to see the same scenario that we’re predicting.

Citigroup Inc. (C) maintained its “Buy” rating on Nucor’s shares, noting that “steel [stocks] have been punished amid the China slowdown and [the] crude-induced exodus from commodities. Yet underlying steel markets are far more solid,” especially in the market for steel sheets, beams, bars and plates – Nucor strengths, and markets where prices remain at, or near, record highs.

Citi actually sees the potential for an earnings surprise in either the third or fourth quarter, and believes earnings for this year and next will exceed current Wall Street expectations – results that, if true, will likely cause Nucor’s shares to shoot higher.

All the technical indicators – as well as the fundamental indicators related to valuation – point to a massively oversold condition in Nucor’s shares specifically, and the steel sector in general. The panic selling that created this oversold condition has created a profit opportunity of which investors should take full advantage.

At current levels, Nucor’s shares feature a very nice dividend yield of 2.64%. The firm, which has paid 141 consecutive quarterly dividends, just declared a “special” dividend of 20 cents a share – in addition to its 32-cent-a-share cash dividend – payable to shareholders of record as of Sept. 30.

Enough is enough: This is a very strong buy.

Source: Buy, Sell or Hold: Nucor Corp.

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