Great Northern Iron Ore Shares Plunged: What You Need to Know

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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: Shares of property trust Great Northern Iron Ore Properties (NYSE: GNI  ) shed as much as 25% in intraday trading on heavier-than-average volume.

So what: The newswires were quiet regarding Great Northern today, so the reason for the hefty decline remains relatively speculative. Just last week, I took a close look at the stock and found that, due to the fact that the trust expires in just a few years, the stock is likely radically overvalued. While I have yet to hear from an investor that's been able to short the stock, today's action could be the result of current shareholders realizing that the current high price makes now an advantageous time to sell.

Now what: Today's drop seems to be a move in the right direction in terms of getting the stock back to a sensible valuation. However, all signs seem to point to the stock being worth even less than the $104 that it's trading at as of this writing. Investors that are sniffing around Great Northern would probably be well advised to continue to stay on the sidelines for now and wait for the price to reach a level that is justified by the likely payouts during the company's remaining life. Either that, or they could simply move on to greener pastures .

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Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or on his RSS feed. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.

Read/Post Comments (2) | Recommend This Article (11)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 19, 2012, at 5:20 PM, MikeMJr wrote:

    I was trying to find the spreadsheet analysis I did on this a while back. At that time the stock was trading at ~$107/shr. I figured it was worth about $ 55/shr at that time. Its getting closer to reality after today.

  • Report this Comment On November 29, 2013, at 4:27 PM, SRHCB wrote:

    I've lived on the MN Iron Range my entire life, and I'm quite familiar with Great Northern Iron. In fact, many years ago, my dad, (who was Coordination of Mining Development for USSteel's MN Ore Operations at the time), was once offered the head job at GNI's local office, located just a couple blocks from my current home.

    Many local people, including me, have owned GNI over the years and generally made pretty good money if their holding period was timed in decades.

    I knew the stock's expiration was coming up, but until I was discussing mining stocks with a local financial analyst today, I hadn't thought of the stock for years. I was shocked to see it trading in the 70's, at least double it's definite value!

    I see there are some short positions, so I guess either somebody smarter than me figured this out long ago, there must be some non-Foolish fools out there who bought themselves a huge loss?

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