Happy Thanksgiving thread!
Portfolio update: sold SAFM and HELE, bought CLF, Cleveland- Cliffs.
Sold SAFM last week after another warning on lower poultry prices. I'm OK with a 4.4% return in 9 weeks and may revisit in the spring.
Similarly, I sold HELE after looking again at its declining cash and rising inventories and other issues mentioned here. Meant to talk to the company again but decided to sell and move on. Small profit.
CLF is a cyclical but undercovered play on the rising demand and price of iron ore and steel. It's market dominance, valuation, outlook, and growth look good to me.
Stock split and divie announced Nov. 9. CEO: "We are pleased to be able to reinstate a quarterly cash dividend to holders of Cliffs' common shares. Given our cash position, debt-free balance sheet and current cash flow projections, we are in the enviable position of being able to take advantage of profitable growth opportunities while simultaneously distributing a portion of earnings to our investors. Payment of the common share dividend demonstrates our Board's confidence in Cliffs' encouraging business outlook. The Board currently expects to maintain or increase the cash dividend on our common shares in future periods."
"At this time," Brinzo continued, "pellet demand for 2005 appears as if it will once again exceed Cliffs' production capacity. Despite planned industry- wide capacity expansions, iron ore production does not appear to be keeping pace with anticipated global demand. Capitalizing on the escalating demand, Cliffs is investing significantly in capacity expansions over the next few years. Two projects slated to be completed in 2005 are expected to expand our pellet production volume by adding approximately 1.0 million tons of capacity at our United Taconite mine and another 800,000 tons of capacity at our Northshore facility.
"Today's announcements clearly reflect the Board's optimism regarding Cliffs' favorable long-term business outlook. We have a multi-pronged strategy for enhancing shareholder value and feel that the reinstatement of the quarterly cash dividend combined with the previously announced one million share repurchase authorization provide an efficient and balanced means of distributing a portion of our profits directly to our shareholders."
Cleveland-Cliffs Inc, headquartered in Cleveland, Ohio, is the largest producer of iron ore pellets in North America and sells the majority of its pellets to integrated steel companies in the United States and Canada. The Company operates six iron ore mines located in Michigan, Minnesota and Eastern Canada, accounting for 45% of NA pellet capacity. BHP, CVRD in Brazil, and Rio Tinto are competitors in the seaborne market. U.S. consumes 21% of world iron ore pellets. There are a total of 11 mines in NA with a capacity of 81 mil gross tons. Consolidation in intergrateds and iron ore; Cliffs gaining a larger share of a smaller market. Some insider selling but only .1% change in last 6 months.
Oct. 27 Reuters story:
The Cleveland, Ohio-based company forecast a rosy fiscal year based on soaring steel prices. Steel makers worldwide have reported healthy profits this quarter fueled by the burgeoning economies of China and India...
Brinzo said he anticipated "a record year" in 2004, based on the fact that North American steel producers are operating at or near capacity and steel pricing was near record levels.
Despite surging oil prices that have dampened global growth forecasts, the world economy is still expected to grow about 4 percent next year, underpinning the demand for raw materials, the company said.
The International Iron and Steel Institute, however, expects steel demand to rise 4 percent to 5 percent in 2005, down from more than 7 percent in 2004.
CLF Yahoo stats:
VALUATION MEASURES
Market Cap (intraday): 988.39M
Enterprise Value (25-Nov-04)³: 722.79M
Trailing P/E (ttm, intraday): 10.05
Forward P/E (fye 31-Dec-05)¹: 6.54
PEG Ratio (5 yr expected)¹: N/A
Price/Sales (ttm): 0.80
Price/Book (mrq): 3.38
Enterprise Value/Revenue (ttm)³: 0.60
Enterprise Value/EBITDA (ttm)³: 4.41
FINANCIAL HIGHLIGHTS
Fiscal Year
Fiscal Year Ends: 31-Dec
Most Recent Quarter (mrq): 30-Sep-04
Profitability
Profit Margin (ttm): 8.66%
Operating Margin (ttm): 11.18%
Management Effectiveness
Return on Assets (ttm): 10.98%
Return on Equity (ttm): 49.58%
Nice 2 yr. chart: stockcharts.com[h,a]waclyiay[de][pc21!b50!f][vc60][iut!Lh14,3!La12,26,9]&pref=G
Income Statement
Revenue (ttm): 1.20B
Revenue Per Share (ttm): 112.885
Revenue Growth (lfy)³: 39.00%
Gross Profit (ttm)²: 22.70M
EBITDA (ttm): 163.80M
Net Income Avl to Common (ttm): 100.40M
Diluted EPS (ttm): 9.108
Earnings Growth (lfy)³: N/A
Balance Sheet
Total Cash (mrq): 265.60M
Total Cash Per Share (mrq): 24.6
Total Debt (mrq)²: 0
Total Debt/Equity (mrq): 0
Current Ratio (mrq): 2.489
Book Value Per Share (mrq): 26.254999
Cash Flow Statement
From Operations (ttm)³: 42.60M
Free Cashflow (ttm)³: -1.60M
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