Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Does Sinking Cliffs Natural Resources Inc (CLF) Amid Iron Ore Glut Provide An Entry Point?

Shares of the mining and natural resources company, Cliffs Natural Resources Inc (NYSE:CLF) have fallen more than 10% in the last two trading days owing to glum forecasts for the price of iron ore. Wolfe Research’s Gordon Johnson argues that the spot iron ore prices are hovering around right now of $60/mt, will soon head for a downturn, crossing its multi-year low of $47/mt in the near future. The reason for the gloomy forecast is that when commodity prices fell to less than $47/mt this year, none of the producers limited their capacity, which has lead to a continued supply gut in the market. Johnson expects that the 52Mmt oversupply in 2014 will swell to about 183Mmt in 2015 given the dip in crude steel production in China this year, which will be a first since the 1980’s. The short interest in Cliffs Natural Resources Inc (NYSE:CLF) stood at 42.20% of the float as of mid-June. Moreover, the company’s gross margin of 7.68 is also much lower than the industry’s average of 23.22.


Smart money has already been closing their holdings in Cliffs Natural Resources Inc (NYSE:CLF) during the first three months. Among the hedge funds that we track, a total of 17 firms had invested a total of $110.19 million in the company at the end of March, compared with 26 funds with $166.45 million at the end of the previous quarter.

Let’s first take a step back and analyze how tracking hedge funds can help an everyday investor. Through our research we discovered that a portfolio of the 15 most popular small-cap picks of hedge funds beat the S&P 500 Total Return Index by nearly a percentage point per month on average between 1999 and 2012. On the other hand the most popular large-cap picks of hedge funds underperformed the same index by seven basis points per month during the same period. This is likely a surprise to many investors, who think of small-caps as risky, unpredictable stocks and put more faith (and money) in large-cap stocks. In forward tests since August 2012 these top small-cap stocks beat the market by an impressive 80 percentage points, returning over 135% (read the details here). Follow the smart money into only their best investment ideas all while avoiding their high fees.

Insider trading provides valuable insights into how the company’s mangement expects the business to perform in the future, and we keep a close eye on these trades as well. Lourenco Gonclaves, President & CEO of Cliffs Natural Resources Inc (NYSE:CLF) has purchased more than 300,000 shares of the company so far this year, while no insider sales have been detected thus year.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.