Potential Further Drop in Cleveland-Cliffs' Stock Value?
Steel Highway's Wobble: Cleveland-Cliffs takes a 15% hit after its February report revealed a larger-than-expected loss and missed revenue targets, leaving investors jittery. The global steel market is struggling with sluggish demand and oversupply, causing prices to plummet. As a company heavily reliant on raw materials, Cleveland-Cliffs feels the pain acutely. But there's a silver lining - tariffs on imported steel could benefit domestic producers like Cleveland-Cliffs. Still, investors might ponder over past performance before embracing this stock.
Remember, in rough waters, Cleveland-Cliffs can take a beating - in 2022, it lost roughly 60% of its value during just a few quarters. If you're looking for upside with less volatility, consider the "Strong & Steady" portfolio, which has outperformed the S&P 500 and delivered returns above 91% since inception.
So, why the fuss now?
Although Cleveland-Cliffs trumpets its $1.5 billion stock buyback program, hopes for improved steel demand, and tariff benefits for domestic producers, the U.S. economic landscape requires concerned scrutiny.
While inflation fears have ebbed, they haven't vanished. In fact, Trump's tough stance on tariffs and immigration has sparked concerns that inflation might return. Such a scenario suggests that the U.S. economy could face challenging times, or even a recession - as our analysis on the economic outlook discusses. Moreover, the new Trump administration's bold policies have increased geopolitical uncertainties. The ongoing Ukraine-Russia conflict, uncertain trade conditions, and diplomatic dialogues with long-term allies such as Canada, Mexico, and Europe complicate matters further.
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Cleveland-Cliffs Stock Woes: The Nitty-Gritty
CLF stock has historically underperformed the benchmark S&P 500 index during several downturns. Though investors anticipate a gentle economic landing, how deep could another recession plunge? Our dashboard, Market's Pitstop: How Low Can Stocks Go During a Freefall?, illustrates key stocks' behavior during and after the last six market crashes.
Inflation Blast (2022)
- CLF stock dropped 64.1%, from $33.07 on March 28, 2022, to $11.87 on November 3, 2022, against a 25.4% peak-to-trough decline for the S&P 500.
- The stock remains below its pre-Crisis high and hit its peak again on April 3, 2024, at $22.83. It currently trades around $10 per share.
COVID-19 Pandemic (2020)
- CLF stock tumbled 59.6%, from $7.60 on February 19, 2020, to $3.07 on March 23, 2020. In contrast, the S&P 500 saw a decline of 33.9%.
- Cleveland-Cliffs stock bounced back and reached its pre-Crisis peak by October 7, 2020.
Global Financial Crisis (2008)
- CLF stock nosedived 89.9% from $119.19 on June 30, 2008, to $12.01 on March 2, 2009. Meanwhile, the S&P 500 fell by 56.8%.
- The stock still hasn't recovered to its pre-Crisis high.
Securing Your Greenbacks
In short, even though Cleveland-Cliffs stock appears affordable now - trading at around 0.26 times last year's sales - its profits dipped last year, and experts predict only 7% growth this year. So, while tariffs should benefit Cleveland-Cliffs, ponder this: Would you sell your Cleveland-Cliffs stock if it plunged to $8, $5, or even lower levels to avoid panicking?
Hang onto your Green with Risk-Aware Quality Portfolios
Trefis teams up with Empirical Asset Management - a Boston area wealth manager - whose asset allocation strategies provided positive returns during the 2008/2009 period when the S&P 500 lost more than 40%. Empirical has integrated Cleveland-Cliffs' revenues into its asset allocation framework to boost returns and reduce risk compared to the benchmark index. They offer a smoother ride as demonstrated by the "Strong & Steady" portfolio performance metrics.
While investors hope for a graceful economic landing, picture the comparison of the last six *market disasters*.
*Join the Trefis Revolution*
Market-Beating Portfolios | Rules-Driven Wealth
Investors, given Cleveland-Cliffs' history of underperforming during market downturns and its current valuation at approximately 0.26 times last year's sales, may want to consider alternative investments to avoid potentially severe losses. For instance, if CLF stock were to plummet to $8, $5, or even lower levels, one might question whether it would be wise to sell to avoid panic. To mitigate such risks, Empirical Asset Management, a Boston area wealth manager, integrates Cleveland-Cliffs' revenues into its asset allocation strategies, aiming to boost returns and reduce risks compared to the benchmark index. Such an approach, demonstrated by the "Strong & Steady" portfolio performance metrics, offers a smoother ride despite the possibility of future market disasters.
