This post is to consider buys and options in CLF. There is VERY large near term risk and reward.
CLF is a US steel manufacturing company, one of the worlds largest, and environmentally cleanest. Says they: “Cleveland-Cliffs is the largest flat-rolled steel company and the largest iron ore pellet producer in North America. The company is vertically integrated from mining through iron making, steelmaking, rolling, finishing and downstream with hot and cold stamping of steel parts and components. ” It is not new to WSB, usually~ top 25 tickers mentioned prior 10y.
Now there is a monstrous “Infrastructure” bill being considered (bridges, roads, rail) for ~1 T USD Will it pass? We will see. That is the play here. It is a straight fundamentals/value play, with a transformative binary event coming.
TBD consider- on the plus side, all the steel needed to correct crumbling bridges, falling condo towers, the rebar for concrete, and the new Amtrak rail proposition…most all of this will come from steel made by CLF. It is a domestic pay to play contracting deal. CLF knows this. They have aquired Arcelor Mittal and AK steel to become THE player that will directly benefit from the passage of the bill. There are financial minuses. To doot:
YUGE Infrastructure Contrax Potentate Transformer events imminent
110MM in cash
Profitable with 4 BB in revenue per Q (!!)
10x positive momentum, from the 2020 trough
2/3 of ownership is institutional / bullish hedges (Lazard, Wellington, Victory, Berkshire/Buffet, Viking et al)
Short float >10%
Cramer likes it
Massive Insider purchase/sell churn of 40 MM shares / 12 mos. Why?
Debt=Assets = 6BB
“Other Liabilities” = 6BB (WTF are those??)
Short float >10%
Cramer likes it
The next week will determine if the Senate will pass this infrastructure thing. It is NOT CLEAR if the 1716 bipartisan earmarks funds for politicians home districts (“pork barrel profit”) will be enough to guarantee votes to pass this overstuffed pig through the Senate. This is the sub-Trillion dollar Jabba the Hutt of bills, being shoved through the door before another election, while its still possible. Negotiation is happening. A few R votes were in swing districts. However, only a few moderate/conservative seantors are needed now. It is also not clear overall if politics will interfere (despite everyone wanting to fund infrastructure), because D are demanding a concomitant social reparation and reconciliation bill, and holding this one hostage, to get equality repaired. This game of chicken will end, one way or another. Ind/Green are on board, for what minor impacts that it matters to. Usually, veterans, energy, environment, and infrastructure are political sacred cows that dont go begging, and the parties can get past theirselves to fund something. Right now the Inf bill and the D hold a 2% advantage, and that is all that’s needed. The benefit is to the home CLF steel plants in MI and MN are accompanied by powerful senators Klobuchar and Stabenow. It’s big, it’s ugly, it’s lobbied sausage. We proceed, woke to that. I assert nothing here of disparaging nature, the company is solid and, Can Do.
Obviously the CEO Goncalves has repositioned the company with aquisitions and debt leverage to take advantage of the possibility of a monster legislative win for this profitable domestic steel company. There is a gigantic balance sheet with big sleeping line items that only a professional forensic accountant could detail accurately in order to assess true risk (not myself, I just Like the Stonk). But Goncalves thinks that this Godzilla of spending will pass, and that negotiations this week will make it run. Normally mining and basic materials are boring. NOT this week.
Is it all “priced in” already ? No. Personally I think the 113 missing people from the Miamo condo, the worsening climate, buckling NW roads, and the possibilty to rebuild Amtrak, but using massive amounts of CLF steel to build new rail etc. will make this a triple bag over the next Q, even w/o Options. Revenue is up for 4 Q straight. There is overall gross political alignment and momentum. Only the trigger remains.
We are building, we are emerging from pandemic isolation to find buckled roads, falling structures, and no war to suck up commodities. This is the spend, this is the company. If you dont like it, you can go pound sand with Vulcan Materials $VMC and do a concrete play, or pump copper with the $COPX ETF. I dont own those. Disclaimer: I have 100 CLF shares, considering more if I can dump some volatile biotech.
This short analysis is my own. Do your DD, find out for yourselves, you beautiful retards, I love you. Maybe CLF will too.
Best of luck
EDIT 1: While the numbers for CLF are all available for DD, the political needs work here; getting DMs. Did not mean to imply the vote was today. Therefore the timeline is updated to Jul 31, TBD before the August recess. I could not find a shceduled vote for a finished product. A call for a House vote was made today by a particular caucus. Tester (MT) believes there are 11-17 R that will vote for it. Legislation is being written frenetically right now. Differences of position between Biden, Pelosi, Shumer, McConnell, and Manchin are apparently nearly addressed. Apparently the goal is to craft a bill that can pass, work it out before hand, and the riders and reconciliation will get included or not depending on who they can get. Last there was a 700B water infrastructure bill not to be confused with this one, and the current infrastructure bill range reputedly is much larger, 1.2T even by some estimates. Thanks
Edit 2 : Important commentary on the market and timeline is digested here. Several have noted the presence of competitors Nucor, CMC, SDI, Gerdau in the rebar market. These makers have raised their steel prices by 40-50/st recently. Yet steel futures are astronomically high right now and are not going down. It was pointed out that 70% of the steel market is scrap. However, China is reputedly out of scrap steel now. It was further pointed out the the original Cleveland Cliffs makes iron pellet as basic fabrication stock, not completed steel product. Now the recent grab of Arcelor Mittal cold roll sheet and other products is what makes the new CLF “vertically integrated”. The post stands. If anything these comments underscore the importance of CLF balance sheet being positive and growing. The slow speed of the congressional action getting to actual CLF books is appreciated. Thanks
Edit 3: Re: Cramer. The visceral, rapid response to even mentioning the guys name has honestly taken me aback. He really evokes something primal in this community. That deserves some reflection and thought. Only one day in, I awoke this morning to another dozen messages about it. As soon as the name was mentioned in the post, a knee jerk reaction apparently went off. Many stopped reading and started writing. Several missed that he was also listed as a negative, so it has to be inferred they didnt get to the overall content summary. Admittedly that following content was a wall of text, but others appreciated it and awarded. Apologies if the attempt at humor botched. Thanks.
For this post I will neither defend nor attack the guy libelously (if thats a word). There is some useful content to his analysis; but there’s also great suspicion and even hatred in this community. It’s broader than just $CLF. So, I hear and appreciate that. However someone else will have to fully characterize and comment on it. I dont get it fully, obviously. Theres history there. Hopefully we Apes can all keep our heads on. Apologies for my stepping on an apparent landmine. Point noted.
Edit 4: TBH for an amusing and helpful counterpoint, go read [Why Biden’s Infrastructure Plan is NOT a ticket to tendie town](https://www.reddit.com/r/wallstreetbets/comments/ofcwca/why_bidens_infrastructure_plan_is_not_a_ticket_to/) by [u/Scifi_Toilet](https://www.reddit.com/user/Scifi_Toilet/)[7 hours ago](https://www.reddit.com/r/wallstreetbets/comments/ofcwca/why_bidens_infrastructure_plan_is_not_a_ticket_to/)