Why Cliffs Natural Resources Inc. Stock Fell Off a Cliff Today

Before you go, we thought you'd like these...
Before you go close icon

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Iron ore and metallurgical coal miner Cliffs Natural Resources saw shares plummet 16.8% today at the time of this writing as it has officially become "Analysts realize the stock isn't doing well and pile on 'sell' ratings" week. This week alone Wells Fargo, RBC Capital, Deutche Bank, and Nomura have all issued some sort of analyst call that either lowers Cliffs to a sell raging or lowers the price target. 

So what: You don't need to look at the analyst ratings for Cliffs to know that things have been rough for the company over a year or so. All you need to do is look at the prices for iron ore. 

Iron Ore Spot Price (Any Origin) data by YCharts

At today's prices of less than $90 per ton, Cliffs and just about every other producer of iron ore is struggling. The company's US Iron Ore production remains profitable, but every other part of the business--Canadian Iron Ore, Australian Iron Ore, and North American metallurgical coal-- are hemorrhaging money. Add to the fact that Cliffs has gone through a complete management overhaul as a result of activist Casablanca Capital's efforts, and you get a recipe that's causing short-minded investors to salivate.  

Now what: Cliffs big drop today wasn't a result of anything changing with the company. It was more just a result of a few lead lemmings leading the way off the cliff. There is likely some concerns whether the company can maintain its dividend and whether its plan to buy back $200 million worth of stock is prudent because of the atrocious market it's in today. 

That being said, today's valuation basically says a company that owns 60% of the US' total Iron ore production is worth less than its current assets--cash, inventory, and accounts receivable. If an investor out there thinks that iron ore prices won't remain this low forever and has the patience to wait, then this could be a potential time to look at buying shares. 

Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here.

The article Why Cliffs Natural Resources Inc. Stock Fell Off a Cliff Today originally appeared on Fool.com.

Tyler Crowe owns shares of Cliffs Natural Resources. You can follow him at Fool.com under the handle TMFDirtyBird, on Google+, or on Twitter @TylerCroweFool. The Motley Fool owns shares of Cliffs Natural Resources. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story

People are Reading