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ITZ takes a look at Cliffs Natural Resources (CLF), the iron ore producer's stock price has gone from $95 over two-years ago to test $15 and currently around $27.50. The company & stock price is turning around. Its debt load and China's economic slow down painted a bearish outlook for the raw materials provider, but recently has seen cost cutting help reduce its debt profile.
CLF is a global company, recent positive PMI news from China, Europe and the U.S. has helped in a rebound. Manufacturing PMI is a key indicator, it has recently crossed above the 50 level in China & Europe and continues to rise here.
Analysts continue to remain bearish even though the world is experiencing an earth-shaking resurgence in manufacturing. In October, the JP Morgan Global Manufacturing Purchasing Managers’ Index (PMI) grew to an incredible 29-month high, rising to 52.1 in October. A number above 50 indicates expansion in manufacturing, and if manufacturing is expanding, so should the economy.
Organization for Economic Co-operation and Development (OECD) Composite Leading Indicator has been heading in a positive direction. This leading indicator provides early signals of turning points in business cycles, including economic activity. Historically, metals performance has closely followed this leading indicator, so as developed markets improved, the S&P GSCI Industrial Metals Index increased.
On a bullish observation- global manufacturing is the relationship between growing strength in PMIs and higher returns from certain commodities, including copper, crude oil, as well as energy and materials stocks. ITZ has recently turned bullish on Crude Oil and suggested entering Proshares UltraCrude ETF (UCO) and continues to favor Silver Wheaton (SLW). Freeport McMoran (FCX) has been in the news recently as hedge funds are getting back into it, looking for copper to go higher.
Iron ore is hot right now READ
Found this of interest,
Executive Vice President, Legal, Government Affairs and Sustainability
& President – Cliffs China
P. Kelly Tompkins Reported Insider Data Link
Summary: ITZ is bullish on CLF due to several factors; mining industry has stabilized and its outlook has improved, CLF's balance sheet is continuing to improve, generating improved cash flow and profits, the Bloom Lake mine issue has been priced in and stock remains undervalued. With a PEG of 0.83 and the material sector at 1.61 -the market is to bearish on the stock and is attractive around $27.
The technicals are also bullish, with a Golden Cross, Inverted Head & Shoulders. It has broken above it's neckline with a throwback reversal. ITZ BUY $27 stop $25.50 & PT $35