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Why Shares of Cleveland-Cliffs Are Climbing Today

By Lou Whiteman - Oct 3, 2019 at 2:55PM

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The company is joining the S&P SmallCap Index.

What happened

Shares of Cleveland-Cliffs (CLF 3.78%) were up more than 9% on Thursday afternoon after the iron-ore producer was added to the S&P SmallCap 600 Index. Being added into an index can prompt mutual funds and ETFs that track that index to buy shares, and it can help a smaller company like Cleveland-Cliffs gain visibility among potential investors.

So what

Cleveland Cliffs will replace Mercury Systems on the S&P SmallCap index prior to the opening of trading on Oct. 8, when Mercury will be added to the separate S&P MidCap 400 Index. The announcement caused shares of Cleveland Cliffs to climb more than 13.3% at one point on Thursday before settling back somewhat.

A large machine loads ore onto the back of a dump truck.

Image source: Getty Images.

The jump is a rare bit of recent good news for Cleveland-Cliffs, a $1.8 billion market capitalization miner and ore producer that has seen its shares fall by 30% in the last three months. The markets have been caught up in fears of a slowdown that could slow demand for steel and iron ore, potentially putting pressure on Cleveland-Cliff's business.

CLF Chart

CLF data by YCharts.

Now what

It's hard to say what the near-term outlook is for Cleveland Cliffs because the company is cyclical in nature, and a slowdown or recession would indeed hamper results. But over the long term, this company looks like a winner, with a portfolio of well-positioned mines and investments in new, more efficient technologies. Being added to the index should help draw in more institutional shareholders, which often reduces volatility, and help support the stock over the long haul.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Cliffs Natural Resources Inc. Stock Quote
Cliffs Natural Resources Inc.
$19.75 (3.78%) $0.72

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