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: Iron ore and metallurgical coal miner Cliffs Natural Resources (CLF -0.49%) saw shares plummet 16.8% today at the time of this writing as it has officially become "Analysts realize the stock isn't doing well and pile on 'sell' ratings" week. This week alone Wells Fargo, RBC Capital, Deutche Bank, and Nomura have all issued some sort of analyst call that either lowers Cliffs to a sell raging or lowers the price target.
So what: You don't need to look at the analyst ratings for Cliffs to know that things have been rough for the company over a year or so. All you need to do is look at the prices for iron ore.
Iron Ore Spot Price (Any Origin) data by YCharts
At today's prices of less than $90 per ton, Cliffs and just about every other producer of iron ore is struggling. The company's US Iron Ore production remains profitable, but every other part of the business--Canadian Iron Ore, Australian Iron Ore, and North American metallurgical coal-- are hemorrhaging money. Add to the fact that Cliffs has gone through a complete management overhaul as a result of activist Casablanca Capital's efforts, and you get a recipe that's causing short-minded investors to salivate.
Now what: Cliffs big drop today wasn't a result of anything changing with the company. It was more just a result of a few lead lemmings leading the way off the cliff. There is likely some concerns whether the company can maintain its dividend and whether its plan to buy back $200 million worth of stock is prudent because of the atrocious market it's in today.
That being said, today's valuation basically says a company that owns 60% of the US' total Iron ore production is worth less than its current assets--cash, inventory, and accounts receivable. If an investor out there thinks that iron ore prices won't remain this low forever and has the patience to wait, then this could be a potential time to look at buying shares.
