Tag - Clf

"March saw no 2 for 1 split announcements," opines Neil Macneale who focuses on stock splits to create his model portfolio. Here's the latest from his 2-for-1 stock letter.

"The situation in which a month passes with no stock splits is becoming more the norm than the exception.

"I’m hoping this season of board meetings and earnings reports will result in at least a few split announcements, but until that happens, we will continue to improvise.

"For this month’s buy, I went back and looked at all the split announcements over the past year and a half that have not already wound up in the 2 for 1 portfolio.

"This list totaled 26 companies. Without exception they are all selling now for less than they were at the time of their split but, for some, the selloff has been dramatic. I am selecting Cliffs Resources (NYSE:CLF) from this group, primarily by the same methodology I have used for all my other picks.

"I did have to ignore or adjust some of the screens to account for the time passed since the CLF split announcement (3/11/08).

"Cliffs Resources, formerly known as Cleveland Cliffs, is a metallurgical coal and iron mining company supplying steel producers in North America and Asia. Forward P/E and Price-to-Book ratios stand at 6.41 and 1.34 respectively and the balance sheet is very strong.

"CLF was founded in 1847 and clearly knows how to make it through tough times. As the economy improves, here or abroad or both, Cliffs will be poised to supply the raw materials needed by the world’s steel makers."

Small-cap stocks remained sharply lower into mid-session, pressured by fresh worries about the health of the banking sector as we enter into earnings season and by dreadful retail sales numbers this morning.  Some of today’s small-cap gainers were LaBranche (NYSE:LAB), Vahli, Inc. (NYSE:VHI) and Panhandle Oil and Gas (NYSE:PHX).

Other Market Watch highlights today included:

• The Energy Select Sector SPDR Fund was off 4.5% at midday.  
• Crude oil tumbled amid the sell-off in stocks; energy shares were dueling with financials for the biggest downside market hit so far today.  
• Bank stocks took a hit in European trading ahead of today’s opening and those concerns continued to play out during the U.S. session.  
• Financials, commodities, retailers and manufacturers are all taking a hit, but the slide in bank stocks is a major spot of bother.

Small Cap Gainers:

• Goldman Sachs upgrades LaBranche; shares rise 16%. See (NYSE:LAB). 
• Valhi, Inc. up 9% after announcing issuance of final low-level radioactive waste disposal license. See (NYSE:VHI).  
• Panhandle Oil and Gas up 6% after declaring a dividend last week. See (NYSE:PHX).   • Charles River schedules 2008 earnings and 2009 guidance release for Feb. 9; shares rise over 5%. See (NYSE:CRL).  

Small Cap Losers:

• Allis-Chalmers Energy slides 16% as energy stocks are feeling the heat today. See (NYSE:ALY).  
• Cliffs Natural Resources shares drop over 15% on deferral. See (NYSE:CLF).
• National Financial Partners Corp. slides 14% as financials nosedive today. See (NYSE:NFP).  
• North American Energy Partners down over 12% on light volume, pulled down by the slump in energy stocks. See (NYSE:NOA).  

Small-cap stocks took flight Wednesday, as investors embraced a spate of relatively positive earnings results and another slide in crude oil as a sign that the market may have weathered the worst of the summer storm. The Russell 2000 (NYSE:IWM) jumped 24.39, or 3.68%, to 686.75, notching the fourth-largest one-day advance of the year, powered by gains in financial and tech stocks.

The impressive rally topped off a picture perfect validation of a bullish chart pattern from Tuesday’s recovery bounce off fresh move lows, and further upside action this week would cement the most powerful technical analysis bullish signal in months. In addition, the heightened volatility in recent days fits with similar whipsaw price action at the lows back in January and March.

The market was also able to carve out today’s sizable gains despite another serving of bearish economic headlines. When the market starts to work higher in the face of bearish news, it is considered a classic show of strength — especially if the move is powered by more than just short-covering amid oversold conditions. While we wait for further confirmation of the recovery off Tuesday’s lows, let’s recap what the market overcame on the data front today.

The big report this morning was the Consumer Price Index release. For the second consecutive day, the market was slapped in the face with sobering inflation news. The headline figure for CPI came in at plus 1.1%, which was the largest monthly advance in 26 years. What’s more, the year-over-year increase was at a whopping 5%, which is the largest rise in consumer prices since 1991. In short, the CPI news was every bit as troubling as Tuesday’s Producer Price Index report, where the year-over-year figure was the highest since June 1981. And the inflation data simply adds to the woes from slumping housing, GDP and labor market reports of recent months.

So, if we are truly mired in a slow growth, rising unemployment, escalating inflation world, then why on earth did small caps put together such an impressive rally today? The easy part of that question is that crude oil prices tumbled down to . . .

After a brief pull back after the opening, small caps staged a welcome upward trajectory, breaking this week’s red streak as better-than-expected earnings from Wells Fargo (NYSE:WFC), the SEC’s initiation to taper the shorting the financial sector has experienced year-to-date and deflating crude served to lift the market.
 
At 1:51 p.m. ET, the Russell 2000 (NYSE:IWM) was up 14.65, or 2.21%, at 677, while the Dow is up 153.96, or 1.4%, at 11,116.50.

Federal Reserve Chairman Ben Bernanke was back on Capitol Hill for day two of his six-month economic progress report. Following a Q&A session in front of the Senate on Tuesday, the Fed Chair told the House a similar version. In testimony in front of the House, Bernanki told regulators that the central bank aims to attain price stability, as inflation in the United States “is too high.”

“Bernanke is stuck between a rock and a hard place right now regarding the economy,” said Bill Greiner, chief investment officer for UMB Asset Management and UMB Bank, and chief economist for Scout Investment Advisors. “The Fed’s priority has been trying to maintain stability in the financial system this year. The collateral damage of that focus now is that they’re going to try to keep the system liquid and not pay strict attention to what’s going on in the inflation world … I think they will be [hawkish] into 2009. They started jawboning about six weeks ago — trying to talk interest rates up, talking about the idea of tightening money supply by increasing interest rates some time in the not so distant future. But then Fannie Mae and Freddie Mac happened.”

As the Fed Chair again addressed slower growth coupled with inflationary pressures that confront the economy, his comments proved timely in the face of troubling consumer price index data.

The headline figure for CPI clocked in at plus 1.1%, which was the largest monthly advance in 26 years. What’s more, the year-over-year increase was at a whopping 5%, which is the largest rise in consumer prices since 1991. Today’s CPI figure, which was in line with the forecast, came on the heels of Tuesday’s unsettling PPI report.

“We’re starting to see signs that headline inflation—and what’s been driving headline inflation on the upside (i.e. transportation costs and food costs) are starting to bleed into other areas of the economy,” Greiner said. “We’re starting to see some serious contagion with energy and commodity price inflation into other segments in the economy. Now I don’t think it’s gotten to a point where we’ll see wage-price spiral inflation. [However,]…if we’re starting to see labor costs move up dramatically in relation to productivity gains then I think we have a much more serious problem on our hands than we do today.”

Investors are often blinded by growth, forgetting that intrinsic value is determined by the present value of future cash flows. Some investors consider EBIDTA a reasonable proxy for cash flow, others consider cash flow from operations, and some just use earnings. But why use a proxy, when you can use dividends? After all, your cash flow, not the company's, is what matters.

We think we've found a reliable dividend source in Great Northern Iron Ore Properties (NYSE:GNI), a non-voting trust that owns interests in both mineral and non-mineral lands on the Mesabi Iron Range in northeastern Minnesota.

Great Northern pays virtually all its net income as dividends, a requisite practice among publicly traded trusts. The income is derived form royalties on taconite — an iron-bearing, high-silica flint-like rock that's ground into a fine powder so that the iron ore can be separated by strong magnets. 

Great Northern's royalty income depends on the number of tons of taconite shipped from its properties by its lessees, which include some of the sector's biggest movers and shakers: United States Steel Corporation (NYSE:X), Arcelor-Mittal (NYSE:MT), Cleveland-Cliffs Inc. (NYSE:CLF) and Essar Steel Holdings.

Great Northern is about as pure as a commodity play gets in the steel sector. The company undertakes no value-adding activities and is wholly dependent on the fortunes of its steel-producing customers and their demand for iron ore.

And those fortunes have been in a secular upswing. According to the International Iron and Steel Institute (IISI), world crude steel output reached 1,343.5 million metric tons in 2007, a 7.5% increase over 2006, marking the fifth consecutive . . .