Why Cliffs Natural Resources, Inc., First Solar, Inc., and Peabody Energy Corp. Are Today’s 3 Worst Stocks

The three biggest laggards in the stock market today each have a hand in either energy, materials, or both.

Jun 6, 2014 at 7:36PM

May's highly anticipated employment report, courtesy of the U.S. Labor Department, came out before markets opened this morning. With nonfarm payrolls up by 217,000 last month, and overall employment reaching a new all-time high, there was a lot to like. Of course, the 6.3% unemployment rate is still a concern, but why fret over the fine print? As the S&P 500 Index (SNPINDEX:^GSPC) ended the week at record highs, Cliffs Natural Resources (NYSE:CLF), First Solar (NASDAQ:FSLR), and Peabody Energy (NYSE:BTU) each lost ground, finishing near the bottom of the index. The S&P 500, for its part, added about 9 points, or 0.5%, to end at 1,949.

Cliffs Natural Resources was the worst-performing stock in the S&P today, shedding 2.2% as it capped off a week during which shares fell 7.7%. The fact that iron ore prices are currently low in and of itself is a setback for Cliffs Natural Resources shareholders, but increasing scrutiny from analysts and one loud activist investor represent further headaches. Research firm Cowen group noted that, as long as iron ore prices remain depressed, Cliffs stock will, too, and the business could struggle to even remain profitable. Meanwhile, hedge fund Casablanca Capital wants to see heads roll on the board of directors, and Cliffs is trying to stem the bleeding by investing less in its business. Occasionally, stocks fall for no good reason. Occasionally, a stock's slump makes a lot of sense.

Shares of First Solar lost 1.8% Friday, and for no good reason. The stock enjoyed a nice rally on Wednesday after the U.S. Commerce Department announced new tariffs on Chinese solar manufacturers that should benefit the U.S.-based First Solar. Ranging from fees between 18% and 35%, the move combats foreign competition in an industry where Chinese manufacturers, given subsidies by their government, have been illegally "dumping" their product in the U.S. at losses in an attempt to gain market share. The increased tariffs are good news for First Solar investors, but that good news was quickly forgotten by Wall Street.


Peabody's coal mining operations in action. Source: Peabody Energy website

Lastly, shares of coal miner Peabody Energy were down 1.5% today, largely because of a downgrade at the hands of Goldman Sachs. Goldman's opinion -- rightly or wrongly -- carries a lot of weight on Wall Street, and with the investment bank slashing its price target (from $21 a share to $16 a share) and rating (from buy to neutral), investors were spooked. Goldman's reasoning was sound, as lower international coal prices, weakening demand from China, and burgeoning competition in Australia combine to create more challenging economics for Peabody Energy. With that in mind, individual investors should always take analyst opinions with a grain of salt, since their interests don't primarily include the growth of your portfolio.

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John Divine has no position in any stocks mentioned. You can follow him on Twitter @divinebizkid and on Motley Fool CAPS @TMFDivine.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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