If ones keeps a longer term perspective and avoids covered calls, large gains can occur especially w/ cyclical stocks. Just be sure they own good quality assets.
I started to build a position in CLF. Small buys over the last several months at/near $11/share. I expect this to be get to $25 in the next 24-36 months especially if large tariffs are imposed on China steel producers.
CLF is FCF positive last 3 years and 2 of the last 3 quarters in 2024. Stock close to a 4 year low (remember WMB & KMI were at multi year lows in 2020); selling at 0.91x Tangible BV, $5.43 billion market cap but with an Enterprise value of $9.5 Billion. Expected 24-36 month return +117%
CLF also making specialized steel used in building transformers w/ a new facility in Weirton, West Virginia
Part of my Built In America theme. Company could also receive the 15% max corporate tax for manufacturing in America.
Cleveland-Cliffs Inc. has announced a significant investment to establish a new electrical distribution transformer production plant in Weirton, West Virginia. This project, which represents a total capital investment of $150 million, aims to address the critical shortage of distribution transformers that is currently impacting economic growth across the United States. The state of West Virginia is supporting this initiative with a $50 million forgivable loan as part of an economic incentive package approved by the West Virginia Economic Development Authority 1 2 4 .Project Details and Partnerships- Location: The plant will be built at the site of the former tinplate manufacturing facility, specifically repurposing the Half Moon Warehouse.
- Production Goals: The facility will focus on manufacturing three-phase distribution transformers, which are essential for electric power distribution systems.
- Job Creation: The project is expected to create approximately 600 union jobs, providing reemployment opportunities for workers previously laid off from the tinplate plant 2 5
. - Partnerships: Cleveland-Cliffs plans to source raw materials for the transformers from its Butler Works steel mill in Pennsylvania, ensuring a supply chain that supports local manufacturing 3 6
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Growth Potential and Market Demand The establishment of this transformer plant is strategically timed as it aligns with increasing demands for electrical infrastructure due to several factors:- Infrastructure Build-Out: There is a growing need for robust electrical infrastructure to support economic expansion and modernization efforts across various sectors.
- AI and Electrification: The widespread adoption of artificial intelligence (AI) technologies is expected to significantly increase electricity consumption. Cleveland-Cliffs' CEO, Lourenco Goncalves, emphasized that "there will be no AI without electricity, and there will be no electricity without transformers," highlighting the critical role transformers play in supporting future energy demands 1 4
. - Market Viability: The U.S. Department of Energy's new efficiency standards for distribution transformers further enhance the viability of this investment by promoting the use of American-made Grain-Oriented Electrical Steel (GOES), which will be produced at Cleveland-Cliffs' facilities 3 6
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Impact on AI Data Centers The rise of AI data centers is likely to increase demand for electrical transformers due to their high energy requirements. As more businesses integrate AI into their operations, the need for reliable and efficient power distribution systems will grow. This trend suggests that Cleveland-Cliffs' new transformer plant could play a crucial role in meeting the energy needs of these data centers, thereby contributing to both local job creation and national energy infrastructure resilience 1 4 5 .In summary, Cleveland-Cliffs' investment in transformer production not only aims to alleviate current supply shortages but also positions the company to capitalize on future energy demands driven by technological advancements and infrastructure development. |
