The article was written by Blair Goldenberg, a Financial Analyst at I Know First, and enrolled in a Masters of Finance at Colorado State University.

CLF Stock Analysis

Summary

Background on CLF

The Metals Market

CLF Stock Analysis

Current Analysts Rating

I Know First Bullish Forecast on CLF in the Long Term

Background on CLF

With a corporate heritage dating back 168 years, Cliffs Natural Resources Inc. has been a major supplier to the production of iron and steel in the U.S. by offering steelmakers world-class raw materials. Today, Cliffs continues to be a leading iron ore mining company and operator. Pioneers in developing the beneficiation and pelletizing process, the Company holds the top position as the largest iron ore producer of pellets in North America, as well as one of the lowest cost producers in the world. Cliffs’ technical knowledge and expertise has helped the company to foster strong relationships with steel producers through the years.

The Metals Market

Recently, the market for American metals has been exponentially increasing. Even Russia based company, Mechel (MTL) is up. As Donald Trump promises to bring manufacturing back to the United States and as China is illegally dumping their metals in the United States under a Vietnamese guise, other metal manufacturing companies are greatly benefiting, such as United States Steel (X) Corporation, SPDR S&P Metals & Mining ETF (XME), AK Steel Holding Corporation (AKS). China has been one of the leading cheap metal producers being used in the United States and now the Donald Trump plans on raising tariffs on their metal shipments, we’re seeing an increase in profit and use of home grown companies.

Copper is also on the rise with the new plans from the Trump Administration. Not only do construction companies need steel and iron for building materials, they often use copper as well. Copper is also up due to the expansion of the Peruvian Toromocho mega-mine. Gold is up after the election due to the decrease in value of the United States dollar but is now leveling out further away from the election.

CLF Stock Analysis

As of Friday November 25, 2016, CLF’s share price is $9.91, which was 7.83% or $0.72 above it’s previous close of $9.20. From November 1, 2016, the price has almost doubled from $5.45 per share.

As you can see from the graph above, CLF has been at a steady incline in the month of November. Following the election, CLF continued to climb and as the election madness began to wind down and the realization that President-Elect Trump would ultimately benefit the steel and iron manufacturing industry in the United States, we can see the exponential jump of CLF.

CLF is one of the cheapest producers of steel and iron ore in the United States, making it an attractive company for companies that use steel and iron on a regular basis, such as AK Steel Holding Corporation (AKS). With the possibility of Chinese metals dwindling in the United States, CLF is quickly becoming the company to look out for. Even with the manufacturing jobs being moved back to the country, organizations are going to want to find cheap natural resources to continue turning a profit, making CLF the ideal manufacturer. Since the election, the price of iron ore alone has jumped 25% from $56.58 per ton to $70.33 per ton. As you can see from the graph below, of all of the main steel manufacturers in the United States, Cliffs produces the most amount of iron ore.

Not only is the price per sharing going up because of President-Elect Trump’s policy on new and increasing tariffs on China, but also because the use of these natural resources are going to go up in the near future. With Trump coming into office, it is projected that infrastructure in the United States will grow. Building materials such as iron and steel are set to go up with the infrastructure increase as they are some of the main building blocks for construction.

Debt plays a major role in stock price. In 2014, CLF was under new management who’s goal was to reduce debt; which they continue to do so. The company raised $300 million with the intention of repaying their debt. In their Q3 earnings, CLF reported that it reduced its debt by $500 million. Their total debt as of Q3 is $2 billion, down from $2.5 billion the previous quarter. The reduction in debt also reduced their net expenses $17 million per year.

Current Analysts Rating



I Know First Bullish Forecast on CLF in the Long Term

The I Know First algorithm identifies waves in the stock market to forecast its trajectory. Every day the algorithm analyzes raw data to generate an updated forecast for each market. Each forecast includes 2 indicators: signal and predictability. Currently, I Know First’s self-learning algorithm maintains a bullish forecast on CLF, in accordance with the above analysis.

Signal Number (shown in the table)

The signal represents the predicted movement and direction, be it an increase or decrease, for each particular asset; not a percentage or specific target price. The signal strength indicates how much the current price deviates from what the system considers an equilibrium or “fair” price. The middle number in the table, under the ticker symbol, is the signal.

Predictability Number (shown in the table)

The predictability is the historical correlation between the past algorithmic predictions and the actual market movement for each particular asset. The predictability indicator is the last value in the forecast. The algorithm then averages the results of all the historical predictions, while giving more weight to more recent performances. Predictability is measured on a scale ranging from negative 1 to positive 1; this metric is an adaptation of the Pearson correlation coefficient.

P=-1 means the actual market moved in the opposite direction than the algorithm predicted.

P=0 means that there is no correlation between the prediction and the actual market movement.

P=1 means that there is perfect correlation between the actual market movement and its predicted movement.

The I Know First algorithm predicted an increase in CLF on November 16, 2016, in a week, the stock was up 22.18%