Combine High Momentum and Value with Cleveland-Cliffs

The commodities market has run hot during the past year. Among the beneficiaries is Cleveland-Cliffs (NYSE:CLF), an iron ore producer. As we’ll see, CLF stock holders have been able to book strong returns during the commodities bull cycle.

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Source: Pavel Kapysh / Shutterstock.com

On the other hand, some value-minded investors might express concerns about the share-price run-up. After all, it’s tempting to want to take profits after a stock has provided multi-bagger gains.

That’s understandable, but this is no time to abandon CLF stock. Just because the share price has rallied, doesn’t mean that it can’t still be a bargain.

Moreover, an investment in Cleveland-Cliffs can be a pure play on the American steel market, which could get a nice boost from a well-documented bill that’s moving through the U.S. government.

CLF Stock at a Glance

Commodities stocks can provide powerful momentum if you catch them at the right time.

If you want to see a clear example of this, feel free to check out CLF stock.

A year ago, this stock was available for just $6 per share. It’s unlikely that you’ll be able to buy the shares at that price again anytime soon.

I’d call CLF stock a paradise for both short-term traders and long-term investors. First of all, there have been plenty of 5%-to-10% dips for traders to capitalize on.

And for the investors out there, there’s indisputable momentum here as the stock has rallied from $6 to an eye-popping $26 in just 12 months’ time.

So, how can we possibly call CLF a bargain? One time-tested valuation metric offers a clue.

It might surprise you to learn that Cleveland-Cliffs has a trailing 12-month price-to-earnings ratio of just 14.92.

That ought to quell the concerns of any value-focused investor.

A Steel Powerhouse

Cleveland-Cliffs isn’t the only steelmaker in America, but it’s a mainstay of the industry.

As InvestorPlace contributor Will Ashworth pointed out, Cleveland-Cliffs is North America’s largest flat-rolled steel producer as well as a major source of iron ore pellets for steel producers.

The company further solidified its position as a giant in the steel industry when it completed the acquisitions of AK steel and ArcelorMittal USA.

In other words, Cleveland-Cliffs is a powerhouse in the steel and iron ore markets. At the same time, the company has deep ties with its workers.

As evidence of this, Cleveland-Cliffs just finalized a three-year labor contract for its Dearborn Works operations with the United Auto Workers (UAW) Local 600.

Covering around 1,000 UAW-represented workers, this contract is to be valid from Aug. 1, 2021, through July 31, 2024.

“Our partnership is a powerful one and, with this latest deal, we will maintain our competitive cost structure in flat-rolled steel relative to any of our peers, union or non-union,” said Cleveland-Cliffs Chairman, President and CEO Lourenco Goncalves.

The Structure of Infrastructure

Cleveland-Cliffs wasn’t in particular need of a positive catalyst. Yet, the existence of a powerful growth driver is certainly welcome.

That driver is running its course through the U.S. government right now.

As you might have guessed, I’m referring to the $1 trillion infrastructure bill which just passed through the Senate.

This will undoubtedly provide a boost to an already robust steel-making industry.

According to Bloomberg Intelligence analyst Andrew Cosgrove, U.S. steel consumption is on track to reach approximately 104 million tons this year.

Plus, that figure is expected to grow to around 108 million tons in 2022.

However, those already impressive numbers might actually be underestimations, in light of the infrastructure bill’s likely impact.

The bill, as it currently stands, provides for $550 billion in new spending on roads, bridges and internet access.

And that should lift steel stocks, including CLF stock, as steel makers will be expected to supply the necessary materials for the proposed massive infrastructure rollout.

The Takeaway on CLF Stock

A continuation of the steel industry’s long-term bull market could be in store.

It’s true that Cleveland-Cliffs isn’t the only U.S. steel and iron ore producer on the market.

Yet, it’s a well-respected player in the industry. Therefore, commodities-market investors should consider CLF stock, which offers excellent value even after its impressive rally.

On the date of publication, Louis Navellier had a long position in CLF.  Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.

The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.

Louis Navellier, who has been called “one of the most important money managers of our time,” has broken the silence in this shocking “tell all” video… exposing one of the most shocking events in our country’s history… and the one move every American needs to make today.


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