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Cleveland-Cliffs: Reaping The Benefits Of Well-Timed Transformational Deals

Mar. 04, 2021 7:31 AM ETCleveland-Cliffs Inc. (CLF)50 Comments


  • Cleveland-Cliffs has been the best performing steel producer in the U.S. even as integration of AK Steel and ArcelorMittal USA is still ongoing.
  • The company is exceptionally well-positioned - both from a market and industry wide perspective.
  • Following the acquisitions, the business is on a much stronger footing with solidified pre-existing competitive advantages.

Source: clevelandcliffs.com

I have been following and owning Cleveland-Cliffs (NYSE:CLF) for a bit more than two years now, but the past one year has been one of the busiest, most exciting and most volatile for the company.

Even though the stock has a relatively high risk and large fluctuations in price are quite normal, this past year was marked with two of the most transformative acquisitions in the company's history, a sharp increase in steel prices and last but not least increased market volatility due to the pandemic.

During this period of increased market and idiosyncratic business risks, however, CLF has been one of the best performing names in the steel industry.

ChartData by YCharts

For the past year, I covered CLF three times - during September and November of 2020 when I explained my long-term investment thesis behind the company and later on improved on this thought piece by adding some nuance on why quarterly fluctuations in fundamentals and share price do not bother me.

Source: Seeking Alpha

In my last analysis in January of this year, I also explained how short-term bullishness and analyst recommendations could drive the share price to unsustainable short-term highs.

Now once again, as CLF share price starts to appreciate, analysts are slowly starting to update their ratings to buy & strong buy, which could drive CLF share price to an unsustainable short-term high.

Source: Seeking Alpha

Having seen this price action before, when sudden inflow of favorable analyst recommendations, new investors and bullish sentiment drove the share price to unsustainable short-term highs, I turned Neutral back in January.

Source: Seeking Alpha

Following the recent correction and fiscal year 2020 results, however, I am turning cautiously positive on share price again while I am not adding to my positions yet.

Positioning from a

This article was written by

Vladimir Dimitrov, CFA profile picture
Investment strategy for those seeking steady and above-market returns

Vladimir Dimitrov is a former strategy consultant with a professional focus on business and intangible assets valuation. His professional background lies in solving complex business problems through the lens of overall business strategy and various valuation and financial modelling techniques.

Vladimir has also been exploring the concept of value investing and in particular finding companies with sustainable competitive advantages that also trade below their intrinsic value. He supplements his bottom-up approach with a more holistic view of the markets through factor investing techniques.

Vladimir made his first investment in farmland right out of high school in 2007 and consequently started investing through mutual funds at the bottom of the market in 2009. In the years that followed he has been focused on developing his own investment philosophy and has been managing a concentrated equity portfolio since 2016. Vladimir is LSE Alumni and a CFA charterholder . 

All of Vladimir's content published on Seeking Alpha is for informational purposes only and should not be construed as investment advice. Always consult a licensed investment professional before making investment decisions.

Analyst’s Disclosure: I am/we are long CLF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Please do your own due diligence and consult with your financial advisor, if you have one, before making any investment decisions. The author is not acting in an investment adviser capacity. The author's opinions expressed herein address only select aspects of potential investment in securities of the companies mentioned and cannot be a substitute for comprehensive investment analysis. The author recommends that potential and existing investors conduct thorough investment research of their own, including detailed review of the companies' SEC filings. Any opinions or estimates constitute the author's best judgment as of the date of publication, and are subject to change without notice.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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