And it is a short term correction after a massive percentage up move of nearly 90% in a very short time. The correction is on news of no significant relevance to CLF's most valuable and largest business, the Great Lakes US iron ore business. Today's action is all a bunch of short term day traders and computer programs working on CLF shares as CLF is always the domestic go-to stock in the iron ore field.
Are you serious? The shares just ran from $5.50 to $9.25 in no time. Sure. shares are crushed from the blow off top years ago. but really dude. The stock was almost just a double.
This is hardly unusual price action for CLF. Every time there is some huge bear report published on the Platts 62 Fe iron ore (the seaborne iron ore shipped to China), CLF get crushed and drops more than all the other iron ore stocks. Funny thing is that CLF has the smallest exposure to this market sand its large US business has basically tiny exposure to this price. Yet, CLF share price moves a major order of magnitude more than the other stocks in the group. It moves this way as it is more easily manipulated than any of the other stocks and the short sellers pile on it whenever there is any perceived bad news.
I thought the the news re Australian shipments to China for December were interesting.
After a slump in export volumes in November, shipments from Port Hedland were strong in December, rising 7.8% month-over-month. Iron ore exports totaled 37.1 million tons, which is an increase of 32.3% year-over-year, compared to a 19% year-over-year increase for November. Out of 37.1 million tons, 30.6 million tons were shipped to China.
November’s slump was due in part to the temporary closing of mills and factories for the Asia-Pacific Economic Cooperation. This was aimed at cutting down on pollution levels.
China’s iron consumption
China consumes two-thirds of the seaborne iron ore. Therefore any uptick or weakness in Chinese demand impacts iron ore companies the most, including divisions of Cliffs Natural Resources (CLF) that are exposed to seaborne trade.
Iron ore shipments to China from Australia have been going through the roof. Chinese demand for Australian iron ore is up huge. The Australians have more product to sell (from expansion) and the Chinese are buying from them like crazy. Other players are losing market share. If the Australians are picking up market shares, the other competitors can not match the prices and are getting knocked out of the market.
good point as the stock was up from $5.50 to over $9 after that headfake collapse when the credit Suisse bozo analyst said sell. At $7.50, shares are still up $2 (up a huge 36%) off the bottom from the Credit Suisse research report.
dude, get real. Who cares what the dividend is! As an investment banker, you are looking pathetic. The correct question is "What is the value of the company?" Let me give you a hint! Figure out the value of each of the parts, Australia, the US, and so on. Then go from there! Hard to believe that you were ever an investment banker. And while you may have been an investment banker, you never were an investor.
jetterclass should be slammed for his ridiculous post. The guy should know better to get on the board and post garbage like that, particularly when he holds himself out to be an investment banker and hedge fund guy. Then he says that he is not interested what what other people's estimates are for EBITDA, but at the same time he is happy to post the EBITDA number the bozo Credit Suisse analyst wrote down for EBITDA in his ridiculous $1 target research report. It is all so lame as to be beyond belief. I would have gladly read what the guy had to say about his own EBITDA estimate and how he got to that number. I would gladly listen to what he thinks CLF's various businesses are worth. And so on. Instead we get some ridiculous euphemisms how management is not telling the truth and should not be trusted, etc. What a joke.
Jeter, anyone on this chat board that knows anything about CLF knows that your are clueless by your comment above. First off, who cares if the dividend is cut? Do you really think that CLF is a "yield play". Are you serious? Second, you comment "i know for certain that managements who r in financial pressure have to present confidence, they r not going to put forward the reality of the situation, so it is not wise to put much faith in management of a financially distressed company telling u everything is fine". This statement is so frigging pathetic it almost deserves no comment. You clearly have not listened to the CEO's Goncalves' first conference call. You must not have read a single thing about the proxy battle to remove prior management as they were driving CLF into bankruptcy and the ship needed to be turned around. So in a blanket statement you say imply that CLF management is not putting forward the reality of the situation (ie they are telling lies to investors), no one should put any faith in management because they are saying everything is fine (which CLF has NEVER done). CLF has not presented "confidence" per say. They have presented "determination" to get the ship straightened out, to address the problems at hand (which they are doing), etc. Your comments are ridiculous and demonstrate a complete lack of understanding what has been going on. You post here with all sorts of typical and useless euphemisms from your days as some investment banker working with Enron or Worldcom.
Dude, if you are going to show up on this board out of the blue and start with that Credit Suisse report as a "starting point", you are basically out to lunch. Why would any intelligent person start with anything of the sort? You should know as someone reasonable intelligent that you start with reading the disclosed SEC filings, the company presentations, industry (not Wall Street reports), product analysis, competitive position analysis, review of customers, etc and then do your own analysis and reach some reasonable understanding/opinion on your own, before going off and reading some Wall Street ridiculous research report and using that as a starting point. You go to the Wall Street stuff as the last stop to see if you missed something and to understand what the average idiot analyst is peddling to the investment community. That moron Credit Suisse analyst put out his $1 target report when the stock was $6. The shares dropped 10% that day and then promptly rose immediately 40% in value. Also do yourself a favor. Go back for the past three months and read every post on this chat board. You will learn a lot more than what you learned skimming the Credit Suisse report.
The point is that you have Credit Suisse and Wells Fargo with ridiculous "bankruptcy" price targets. Then Goldman is at $7. Why isn't Goldman at $1? And of course, none of these research reports ever ring fence and establish the valuation of the US business. It is always all about the price decline in the Platts Fe 62 spot price (seaborne price to China) which has little to do with the company's US business and all about Bloom Lake (which is now shut down thankfully - eliminating a massive ongoing money losing operation that never got airborne). Bloom Lake and China are all "old" news. These stories have been so beaten into CLF's share price. But it makes for good headlines and short term action in the stock price, which the analysts and their brokerage firm employers love as it generates daily trading volume. It is all a joke as no analysts and few posters, other than intelligent ones like w999surf, really focus in on the inherent value of CLF, which is almost all the awesome US business. A few portfolio managers get it as they have initiated large new positions in the stock at the current levels, give or take a buck or two.
I remain amazed after going through the Enron, Worldcom, 2001 internet bubble, the 2008 real estate bubble, etc etc that anyone would attach any credence to any wall street investment research. I am not saying that the research is all bad. I would say that they are wrong the majority of the time. But we are right back to the old situation that most people are too lazy or dumb to do the investment work to figure things out themselves. Lacking that effort or ability, it sends them right back to basing everything they do on questionable research written by people that they have never met and do not know. The automatically assume that because these research analysts are employed by Wall Street firms that they must be creditable and make sound investment recommendations, when history shows the exact opposite to be true.
Are you kidding? Customers may start getting concerned? What are you frigging talking about? Do you really think that CLF's US customers are going to get concerned when Canadian operations are legally separated from the US business, the US business is all tied up with long term contracts and relationships that go back 50 years and more. Where would the US customers go to get pelletized iron ore for their Great Lakes operations? What is clear to me is that you are some investment banker that used to peddle ridiculous deals to whatever sucker you could find (like some defaulted mortgage back bond products or some overvalued acquisition like the one CLF fell for when it bought Bloom Lake). Then you went to some hedge fund and day traded off analyst research recommendations because you never learned how to do any research on your own. Your comment "look at the credit suisse report for their assumptions, don't seem out of line given market prices and futures contracts for iron ore (declining prices for 2 years)" is totally lame. Do some real work and then post something here.
Are you frigging kidding? You used the Credit Suisse report for the numbers you posted here? You are out to lunch. As an "an investment banker and managing director at a hedge fund for 25 years", you should know better than to rely on such an analyst report. I am amazed that you did not even bother to do your own analysis.
Having also been an investment banker and hedge fund portfolio manager for longer than you, I learned long ago that you have to do your own analysis, like w999surf does. You are holding yourself out to the chat board as if you are some highly experienced investment person, yet you go to the Credit Suisse report as if it is some kind of gospel. Are you serious? I guess you liked Enron and Worldcom when they were recommending those stocks.
Do something constructive with your time instead of parroting what some bozo analysts writes in a research report. Do some of your own research.
I thought that all the analysts were saying CLF was going to $1. Now Goldman says $7!!! I wonder if Credit Suiss and Wells Fargo will upgrade their price targets?
The answer to your question is as follows. CLF shares were up big yesterday, so the stock got today's market pop yesterday. Also, the shorts in CLF are still heavily engaged and I suspect that yesterday's pop was some short seller throwing in the towel (or booking his sizable long term profit) especially after the news that respected hedge fund manager Einhorn publicly revealed that he had closed his short position. Much of CLF's pop yesterday cam late in the day in a total short term spike. So today, no one is buying and short sellers are attempting to push it back down as what short seller wants a runaway train. When CLF shares rise, as they eventually will, the move is going to be huge and fast. Look at the past daily chart for several years and check out the up moves, specifically 2006-2008 and then 2009-2011 periods. These up moves are unreal - 5 baggers. The short sellers do not want to see anything like that again. So they will work a stock like CLF such that it will not run hugely with an up big market. The gang up on it and pull all sorts of other trading manipulation to keep the shares down. This then makes everyone think that there is some awful news around the corner or that the stock is just a piece of ----. So people wont buy the stock in the up market and then the longs are scratching their heads saying "What's the problem? The market is up huge and I own this stock that is down!!!".
In the end, it is all noise.
Credit Suiss analyst puts a $1 target on CLF when shares were $6 something. Just a couple of weeks ago. Shares are now up about 50%. What a dope. Can't wait for the next conference call when Goncalves puts the smackdown on the analyst.
January 20, 2015. NEW YORK (TheStreet) -- Shares of Cliffs Natural Resources (CLF - Get Report) closed down 5.06% to $8.45 on Tuesday after Greenlight Capital announced it had closed its short position in the iron ore and coal miner.
Now I have to say that it is amazing that CLF shares fell on this news. Greenlight Capital is very well respected. Why would they ever cover their short position (which I am guessing may have been of reasonable size) if the much publicized price targets for the shares is only $1? Why would you ever cover the short?
The answer is simple. Greenlight does not believe for one second that CLF shares are going to $1. In fact, they don't believe that the shares are going to $4 either (or probably even back below $6), as that would be a huge 50% gain on a short position. They are covering the shares as they think that the shares are going to rise, not fall.
CLF has been in business for 150 years so far, but not all of those as a public company. CLF will be in business for another 150 years, but also not necessarily as a public company. . I suspect that CLF will be bought out by one of the large iron ore companies who are dying to get into the US market.
On December 17th, Credit Suiss put out that ridiculous research report with a $1 price target on the shares. That recommendation drove the shares to an intraday low of $5.60, before the stock recovered $0.80 (15% gain off the bottom) to close at $6.41, down $0.40 on the day.
So where are we now almost a month later? CLF shares are at $8, up $1.60 from that $6.40 close on Dec 17. That is a 25% gain! And shares are up $2.40 from the intraday low on the date of the Credit Suiss recommendation. That is a 40% gain.
So, I find it amazing that anyone anywhere talks about CLF going to $1. That piece of research was total garbage. CLF shares are not falling to $1. The stock is going up!
Sure, there are the one time closing costs. And I am not concerned about merchandise as that can be moved to other stores.
The net result is an ongoing business that is more profitable and thus more valuable. The way the stock market operates as I see it is that a JCP store that loses money is "negative" value to the JCP share price. The money losing store serves to offset the good earnings from the money making stores. If I have one store that makes $500,000 per year and one store that loses $250,000 per year, my overall combined profit is $250,000. If I get a p/e of 10 times on my $250,000 in profits, then my business is worth $2.5 million in the stock market (as people just look at the headline profits and not delve deeper). But wait, I have a store that on a standalone basis is worth a p/e of 10 on $500,000 of profit, for a value of $5 million. My money losing store actually costs me $2.5 million in negative stock market value. If I close my money losing store, I get rid of that store's operating losses and its "negative" stock market value disappears. With that my company's stock price doubles from $2.5 million to $5.0 million. This is what many call hidden value - when one poorly performing asset hides the profitability of a much more valuable well performing asset.
That is the power of restructuring in relation to stock market valuation.
For another great example of this currently, go take a look at CLF
In Q3 2014 JCP reported $2.76 billion in revenues and an operating loss of $42 million (losses have been declining rapidly on a quarterly basis). With 1060 stores, that means an average loss per store of roughly $40,000 per quarter. The really poorly performing stores must be losing much more than the average rate, I would suppose on the order of $150,000 per store per quarter. This is a total guess on my part. Eliminating 40 stores losing $150,000 each per quarter creates operating profits savings of $24 million. That is over half the loss incurred by JCP in the prior quarter. With same store sales up 3.8% recently, I have to conclude that the company is rapidly approaching operating income profitability. I would think that the 4th quarter will be profitable, while the seasonally slow first quarter will slip back to a loss. It will be interesting to see how investors respond if the company gets back to operating income profitability.
Giving community college students more "free money" and not having them pay anything at all for their education will only serve to cheapen the education and have people buy into a "its for free and then of little value" mentality. The colleges will not change their teachers or curriculum as the government paying the students' tuition puts no extra money in the college's pocket. It only saves the student some money. Obama and the Department of Education know that their hands are tied. They can not attack the community college system as they did with the for profit education companies. The federal government with the help of vociferous short sellers were more than happy for political gain to distort the true picture in education, student loans, taxpayer subsidized tuition for community college students, and a system wide total (not annual) $150 billion student loan default problem as measured against a $150 billion ANNUAL taxpayer subsidized student giveaway for those in community colleges. To show results, the Department of Education must deal with the community college problem. The for profit schools are not the issue. They are tiny compared to the community college student base and ongoing taxpayer cost. I wonder why the government does not give free tuition money to those students that attend the for profit schools (that are more successful than the community colleges)? Why not? It would be money better spent with much better outcomes. And what is next, if Obama's proposal gets passed? Free community college for all years, not just two. Then the education system in this country becomes 100% public school all the way through college. And we all know how great the public school system has worked out versus its private school counterpart.