Tag - Mt

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 . . .

The Russell 2000 (NYSE: IWM) swung up and down today but eventually failed to join the other major U.S. indices in the green. The small-cap index lost 1 point, or 0.13%, to 749.33, its fifth consecutive decline. The Dow Jones Industrial Average (INDU) added 51.70 points, or 0.40%, to 13,010.14.

On a year-to-date basis, the Russell 2000 has shed 4.84%, while the Dow has advanced 4.29% and the S&P 500 has gained 1.63%.

A volatile day of trading began on a bullish note following news before the opening that U.S. housing starts unexpectedly increased 3% in October, according to the U.S. Census Bureau. Economists were forecasting a small drop after September’s steep 11.4% decline.

Privately-owned housing starts were at a seasonally adjusted annual rate of 1.229 million in October, compared with September’s slightly upwardly revised level of 1.193 million.

Stocks opened in positive territory, with investors apparently disregarding the part of the government’s report that showed a decrease in buildings permits.

Buildings permits, a sign of future construction, fell 6.6% to an annual rate of 1.178 million.  That’s the lowest level since 1993 and a sign that the housing sector will most likely continue to stagnate. Building permits in September were 1.261 million at an annual pace.

The bulls remained dominant until shortly after 12 p.m. ET, when the rally abruptly ran out of steam and went into reverse. The small-cap index was the first to take a hit, followed shortly later by the other major U.S. indices.

It’s difficult to say with certainty what the catalyst was, but financial stocks declined as investors once again turned their attention to the credit problems stemming from the meltdown in the subprime mortgage sector.

The Russell 2000 (NYSE: IWM) has fallen far below the flat line as the morning rally on Wall Street goes into reverse. At 2:16 p.m. ET, the small-cap index had fallen 7.04 points, or 0.94%, to 743.29. The Dow Jones Industrial Average (INDU) was down 56.49 points, or 0.44%, to 12,901.95.

At about 12 p.m. ET, small-cap stocks abruptly lost steam and nosedived into negative territory, where they have since been joined by the other major U.S. indices.

The apparent reason for the sharp drop is a decline in financial stocks as investors once again turned their attention to the credit problems stemming from the meltdown in the subprime mortgage sector.

Before the start of trading today, Freddie Mac (NYSE: FRE), a government-chartered company that buys U.S. mortgages, reported a record quarterly loss and warned that it may have to cut its dividend.

A number of financial institutions have taken a hit in recent months as declining house prices and a wave of foreclosures and delinquencies made securities backed by subprime mortgages essentially worthless.

Morning trading was dominated by the bulls following news of a report from the U.S. Census Bureau that housing starts surprisingly increased 3% in October, after a fall of 11.4% in September.

Elsewhere, the price of oil has added $3.39 to $98.03 a barrel.

The Russell 2000 (NYSE: IWM) is posting gains following news of a surprise rise in October U.S. home construction.

At 10:32 a.m. ET, the small-cap index had added 2.92 points, or 0.39%, to 753.25. The Dow Jones Industrial Average (INDU) was up 86.66 points, or 0.67%, to 13,045.10.

Housing starts surprisingly increased 3% in October, the U.S. Census Bureau reported before the start of trading. That came as a surprise to economists, who were forecasting a small drop. Housing starts fell 11.4% in September.

Builders broke ground on 1.229 million homes at an annual rate, above the 1.193 million annual pace reported in September.

However, it’s doubtful that the news signifies an improvement in the U.S. housing sector.

Buildings permits, a sign of future construction, fell 6.6% to an annual rate of 1.178 million, the lowest level in more than a decade.

Nevertheless, investors were feeling mildly bullish, particularly after Monday’s sell-off exposed bargain buying opportunities.

There is something nostalgic about companies that manufacture hard tactual things that exist in the physical world. Such manufactures conjure images of the robber-baron years of yore, where huge industrial monoliths created blush-inducing wealth and powered the U.S. economy at a pace China can only imagine.

Of course, those days have long been relegated to historical contemplation; U.S gross domestic now trundles along at a 3% to 4% annual pace (if we're lucky) and most of the industrial manufacturing might has been supplanted by things ephemeral and ambiguous like cyberspace and silicone.

But that's OK; plenty of U.S. companies still thrive on manufacturing hard, tactual things—they just do it on a smaller, more environmentally friendly scale. NN, Inc. (Nasdaq: NNBR) is one of these smaller, more environmentally friendly manufacturers. Specifically, it manufactures high-precision ball-and-roller bearings, steel balls, cylindrical rollers, and plastic and metal retainers. The company's output can be found in such diverse machinery as automotive gearboxes, wheel bearings, hydraulic pumps, electronic instrument and fluid control components.

Since its formation in 1980, NN has grown primarily by acquiring other bearing manufacturers (think an ArcelorMittal (NYSE: MT) strategy, but on a more modest scale). Today, the business encompasses a diversified customer base spread across Europe (59% of sales), North America (30%) and Asia (11%) that's served by an equally diversified production base spread across the United States, Europe and China.

This production base was further spread and diversified last November with the purchase of Whirlaway Corp., a manufacturer of precision metal components and fluid control assemblies, for $45.6 million. Whirlaway is expected to add another $70 million to $75 million to a top-line that has grown at a 17.8% average annual clip over the past decade.   

The Russell 2000 (NYSE: IWM) posted a solid gain despite bad news from the U.S. housing sector, while the Dow slipped. The small-cap index rose more than the other major U.S. indices for the second consecutive day, adding 7.23 points, or 0.88%, to 831.97. The Dow Jones Industrial Average (INDU) lost 40.24 points, or 0.29%, to 14,047.31.

Small caps defied the market today, moving up despite news of a steep drop in pending U.S. home sales in August.

The National Association of Realtors reported today that pending home sales fell 6.5% in August due to the ongoing mortgage problems. Its index of pending home sales dropped to 85.5 from an upwardly revised 91.4 in July. That’s the lowest level since tracking began in August 2001 and 21.5% below the level in August 2006

“Fewer contracts were being written because of mortgage availability issues,” said NAR senior economist Lawrence Yun in a statement. “A separate internal survey of our members shows more than 10 percent of sales contracts fell through at the last moment in August, primarily the result of canceled loan commitments.”

News of the housing sector’s latest troubles all but guaranteed that the major U.S. indices would spend the day in negative territory, with the Russell 2000 and Nasdaq the sole exceptions.

Stocks opened the session close to the flat line but quickly tumbled as investors were apparently eager to cash in on Monday’s gains and disregarded news of the latest corporate deal-making.

The Russell 2000 (NYSE: IWM) is the only major U.S. index in positive territory, while the Dow (INDU) has taken a stumble.

At 10:22 a.m. ET, the small-cap index had added 3.92 points, or 0.48%, to 828.66. The Dow Jones Industrial Average was down 14.63 points, or 0.10%, to 14,072.92.

With little on the economic front, investors are focusing their attention on news of more mergers and acquisitions.

Toronto-Dominion Bank (NYSE: TD) reported before the opening that it has agreed to buy Cherry Hill, N.J.-based Commerce Bancorp, Inc. (NYSE: CBH) for $8.5 billion in cash and stock. The deal, which will make TD Bank owner of Commerce’s more than 420 branches in eight east coast states, is expected to close in the first half of 2008 pending regulatory approval.

In other news from the financial sector, Citigroup Inc. (NYSE: C) has agreed to purchase the remaining 32% stake of Japanese brokerage Nikko Cordial Corp. for $4.6 billion. New York-based Citigroup, the largest U.S. bank by market capitalization, first purchased more than 50% of Nikko in April.

Elsewhere, Luxembourg-based ArcelorMittal (NYSE: MT), the largest steel company in the world, announced that it will pay $542 million for the remaining stake in Argentina-based steelmaker Acindar.

Overseas, Asian exchanges produced solid gains, with Hong Kong’s Hang Seng Index adding 3.9%, while Tokyo’s Nikkei 225 gained 1.2%.

The major European exchanges also rose. The United Kingdom’s FTSE 100 climbed 0.5%, Germany’s DAX 30 increased 0.5% and France’s CAC-40 gained 0.8%.

The Russell 2000 (NYSE: IWM) futures are up and the small-cap index will likely open higher after a strong rally on Monday.

The bulls are ready to seize control of trading today following news of more mergers and acquisitions.

Toronto-Dominion Bank (NYSE: TD) reported this morning that it has agreed to buy Cherry Hill, N.J.-based Commerce Bancorp, Inc. (NYSE: CBH) for $8.5 billion in cash and stock. The deal will close in the first half of 2008 pending regulatory approval.

In more financial news, Citigroup Inc. (NYSE: C) has agreed to purchase the remaining 32% stake of Japanese brokerage Nikko Cordial Corp. for $4.6 billion. New York-based Citigroup, the largest U.S. bank by market capitalization, first purchased more than 50% of Nikko in April.

Elsewhere, Luxembourg-based ArcelorMittal (NYSE: MT), the largest steel company in the world, announced that it will pay $542 million for the remaining stake in Buenos Aires, Argentina-based steelmaker Acindar.