July 16, 2021
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Transcript

Marko Rojnica

Cleveland Cliffs is a Cleveland, Ohio based company that specializes in mining and processing iron ore, as well as steelmaking.

They are the largest flat-rolled steel company and the largest iron ore pellet producer in North America.

Ever since the mini-market crash in March of 2020, CLF has been steadily trading upwards, going from a low of $2.50 to cross the $20 mark recently.

In March of 2020, Cleveland Cliffs successfully completed the acquisition of AK Steel, integrating their iron producing business with steel manufacturing.

In June of 2020, the talks about the $1 trillion infrastructure spending started, pushing the stock up to around $8.

Then in September of 2020, the company announced plans of buying the U.S. operations of ArcelorMittal in a cash-and-stock deal.

This made the company the largest flat-rolled integrated steel producer in the United States.

During the end of 2020, steel prices kept increasing, driving up CLF’s stock price to mid teens.

During 2021, the company has been trading up and down month over month, with the largest surge happening in early June when WallStreetBets entered the name.

Since then, the stock came down from the $24 levels and continues trading strong until this day.

So, where is CLF going next, and how can we use Options to profit from it?

In this video, I’ll guide you through the bull and the bear case…

Then, we’ll get Felix Frey on to give us his view on the stock, and show us a few different Options plays that you can use, whether you’re bullish or bearish.

So stay tuned, you don’t want to miss it!

So, we have a very exciting mining and steel making company that went from $2.50 to over $20 in less than two years.

My name is Marko Rojnica and I’m going to show you what the bulls and bears are saying about CLF, and then, we’re going to have Felix Frey show us a few different options plays.

But first, what is Cleveland Cliffs?

Cleveland Cliffs was founded in 1847 by Samuel Mather and his business associates in Cleveland, Ohio.

The company specializes in mining, beneficiation, and pelletizing of iron ore, as well as steelmaking, including stamping in tooling.

Right now, the market cap of CLF is around $11 billion.

Current state of affairs in the market and in the world, along with the company’s strong financial numbers, has the bulls very excited about Cleveland Cliffs.

On the other side, the bears are mainly concerned about the current macroeconomic climate turning around, thus hurting the stock.

So in that spirit, let’s start off with what the bulls are saying!

1) Strong Financial Numbers

Cleveland Cliffs has returned over 295% over the last 12 months… and the bulls believe there is still room to grow.

The first quarter of 2021 is important to note because that’s the first quarter with results from both AK Steel and ArcelorMittal’s operations under CLF.

The company finished the quarter with $4 billion in revenues, which is already more than 75% of the full-year sales generated in 2020!

They also reported strong earnings of $57 million and adjusted EBITDA of $513 million in the first quarter, compared to losses of $49 million and adjusted EBITDA of $23 million in Q1 of 2020.

This is a strong tell-tell sign of the company’s effectiveness in capturing profitable opportunities presented by the booming steel market.

To make things better, with the soaring steel prices expected to persist, management has their eyes set on achieving EBITDA of $4 billion by the end of the year.

On top of that, their debt repayment efforts are strong, with aims of repaying $2.3 billion of debt in 2021, reducing their current debt portfolio by as much as 40%.

If they manage to achieve this, it would reduce their debt to EBITDA ratio down to below one times, which is significantly lower than the industry’s average of approximately two times.

With all of this taken into account, the bulls are forecasting sales of $16.3 billion and net income of $1.4 billion by the end of the year, which coincides with adjusted EBITDA of approximately $4 billion that we just mentioned.

2) Strong Industry Growth Potential

The bulls like to put a lot of emphasis on the state of the steel industry as a strong point to own Cleveland Cliffs.

They are quick to point to both transitory and long-term trends that have a positive impact on the company.

For one, consumer demand spiked during lockdowns, as people weren’t spending money on dining out, travel and other services, but were working on renovating their homes and improving their living spaces.

All of that required steel.

The shift to electric vehicle supply and demand growing exponentially, there’s a big need for steel. Since EV batteries are so heavy, electric vehicles tend to be heavier and thus require more and higher strength steel.

There are also talks about China potentially reducing their steel exports due to their efforts of reducing CO2 emissions and improving air quality.

China has already eliminated its export rebate (form of a subsidy for Chinese steel exports), and there are rumors they might be adding export taxes as well.

This would help US steel producers increase their margins.

The push towards green power and building out the required infrastructure around that will also require steel.

The list goes on and on, but these are some of the main points the bulls focus on when pointing out the vast potential for Cleveland Cliffs in the coming months and years.

Let’s now take a look at the last bullish point.

3) The Infrastructure Deal

Then we have a big elephant in the room, being the government infrastructure plan.

The US government is planning to roll out a $1.2 trillion dollar infrastructure bill to rebuild roads, bridges, rails, airports and other key infrastructure, all of which requires steel.

But it’s not just the United States government, it’s governments around the world trying to stimulate the economy with various forms of infrastructure spending.

While the infrastructure plans in the US and the west are still in the planning stages, China stimulus spending has already been going on for months.

And because of the length of these projects, the incremental demand for structural steel will be here for years to come.

When you have the American Society of Civil Engineers grading the nation’s infrastructure as a D+, warning that its deterioration is harming the nation’s ability to compete in the global economy…

… you can be even more certain that this is not a matter of if, but when.

Now, before moving on to the bear arguments, let’s quickly recap the bullish points we’ve made in Cleveland Cliffs.

The bulls start off with CLF’s strong financial numbers… followed by the strong industry growth potential.

Lastly, the bulls believe that the government infrastructure deal is going to drum a lot of business for a company like Cleveland Cliffs.

Those were the main bullish points in CLF, but let’s now take a look at what the bears are saying…

1) Price Action of Steel

One of the main bearish concerns are the hyperinflated prices of steel that are already accounted for in CLF’s value.

Steel prices went up a lot like lumber, and they are concerned that the prices will come down and hurt Cleveland Cliffs.

Since 2020, steel prices have gone up staggering 215%!

With steel trading in the $1700-1800 range, there are reasons to be worried.

We mentioned lumber, which peaked at $1500, up 300% above its pre-pandemic levels… has crashed down over 50% since.

Can the same happen in Steel?

There are also worries about China dumping steel with their heavy exports of cheap subsidized steel that might overflood the market and thus push the steel prices down.

With that in mind, let’s take a look at the second bearish point.

2) Economic Cycle Might Hurt Commodities

We’ve noted that prices are extremely high right now and that everything is priced in.

There have also been looming concerns over inflation that may cause the Fed to raise interest rates sooner than expected.

That would hurt the commodity market, thus hurting Cleveland Cliffs.

The bears like to point out that such a “correction” would significantly hurt the stock which is already very optimistically priced.

And as we know, commodity businesses have a lengthy history of ruinous cyclicality.

To add on to this, there’s a lengthy history of global overcapacity, that combined with unwanted macroeconomic environments, would cause major problems with a company like Cleveland Cliffs.

Let’s now take a look at the last bearish point.

3) Infrastructure Deal May Not Get Passed

Just like the high steel prices staying high are priced into the stock, the same is true with the infrastructure deal.

The bulls noted that China is already executing their infrastructure build outs, while the west and the United States are still just talking about it.

What would happen if the infrastructure deal doesn’t get passed?

What would happen if there are prolonged negotiations between the parties on the infrastructure bill?

Perhaps it does get passed, but much less money is allocated towards it?

The fact that everything is already priced in at the highest levels, any deviation towards the downside might cause a significant selloff in CLF.

What might end up happening is a “boom-bust” scenario where many investors would run the risk of losing any money or gains invested in Cleveland Cliffs.

Like anything in the market, this is a possibility that the bears aren’t willing to overlook and are very quick to point out.

So, those were the main bearish points in CLF…

Let’s now take another look at the bullish & bearish points before having Felix Frey on to give us a few different trade ideas in CLF.

Bullish Points

  • Strong Financial Numbers
  • Strong Industry Growth Potential
  • The Infrastructure Deal

Bearish Points

  • Price Action of Steel
  • Economic Cycle Might Hurt Commodities
  • Infrastructure Deal May Not Get Passed

So, that was the rundown of Cleveland Cliffs, where we looked at the bullish and bearish points, but now it’s time to get Felix Frey on…

Where he’ll give us his view on the stock, lead us through the technical analysis and give us a few different options trade ideas that we can play no matter if we’re bullish or bearish…

Stay tuned, the best is about to come!

Felix Frey

Coming soon

Marko Rojnica

Thank you Felix for giving us a few different Options Trades to consider in Cleveland Cliffs…

Now, if you enjoyed the video, please leave a like 

AND if you’d like to see more stock analysis just like this one… 

make sure you subscribe to the channel and turn on the bell notifications.

Also, I would love to hear your thoughts on CLF... And I’d like YOU to add to the story. Comment your thoughts & opinions on the bullish & bearish cases we’ve made… and tell us where you think CLF is going next.

Don’t forget, OptionsGeek also has a comprehensive Options education program called 3 Steps to Profit that teaches you how to Trade Options like the Top 1%.

As a bonus, you also get 1 month free of Felix Frey’s Winning Picks Premium ideas, so make sure you check the link in the description!

Get 3 Steps to Profit + 1 Month of Free Winning Picks Premium Ideas

Thank you, I’ll see you in the next one.

Watch Next

CCIV Bulls vs Bears

SKLZ Bulls vs Bears

NIO Bulls vs Bears

FUBO Bulls vs Bears

AMD Bulls vs Bears

Find Your Next Idea


Transcript

Marko Rojnica

Cleveland Cliffs is a Cleveland, Ohio based company that specializes in mining and processing iron ore, as well as steelmaking.

They are the largest flat-rolled steel company and the largest iron ore pellet producer in North America.

Ever since the mini-market crash in March of 2020, CLF has been steadily trading upwards, going from a low of $2.50 to cross the $20 mark recently.

In March of 2020, Cleveland Cliffs successfully completed the acquisition of AK Steel, integrating their iron producing business with steel manufacturing.

In June of 2020, the talks about the $1 trillion infrastructure spending started, pushing the stock up to around $8.

Then in September of 2020, the company announced plans of buying the U.S. operations of ArcelorMittal in a cash-and-stock deal.

This made the company the largest flat-rolled integrated steel producer in the United States.

During the end of 2020, steel prices kept increasing, driving up CLF’s stock price to mid teens.

During 2021, the company has been trading up and down month over month, with the largest surge happening in early June when WallStreetBets entered the name.

Since then, the stock came down from the $24 levels and continues trading strong until this day.

So, where is CLF going next, and how can we use Options to profit from it?

In this video, I’ll guide you through the bull and the bear case…

Then, we’ll get Felix Frey on to give us his view on the stock, and show us a few different Options plays that you can use, whether you’re bullish or bearish.

So stay tuned, you don’t want to miss it!

So, we have a very exciting mining and steel making company that went from $2.50 to over $20 in less than two years.

My name is Marko Rojnica and I’m going to show you what the bulls and bears are saying about CLF, and then, we’re going to have Felix Frey show us a few different options plays.

But first, what is Cleveland Cliffs?

Cleveland Cliffs was founded in 1847 by Samuel Mather and his business associates in Cleveland, Ohio.

The company specializes in mining, beneficiation, and pelletizing of iron ore, as well as steelmaking, including stamping in tooling.

Right now, the market cap of CLF is around $11 billion.

Current state of affairs in the market and in the world, along with the company’s strong financial numbers, has the bulls very excited about Cleveland Cliffs.

On the other side, the bears are mainly concerned about the current macroeconomic climate turning around, thus hurting the stock.

So in that spirit, let’s start off with what the bulls are saying!

1) Strong Financial Numbers

Cleveland Cliffs has returned over 295% over the last 12 months… and the bulls believe there is still room to grow.

The first quarter of 2021 is important to note because that’s the first quarter with results from both AK Steel and ArcelorMittal’s operations under CLF.

The company finished the quarter with $4 billion in revenues, which is already more than 75% of the full-year sales generated in 2020!

They also reported strong earnings of $57 million and adjusted EBITDA of $513 million in the first quarter, compared to losses of $49 million and adjusted EBITDA of $23 million in Q1 of 2020.

This is a strong tell-tell sign of the company’s effectiveness in capturing profitable opportunities presented by the booming steel market.

To make things better, with the soaring steel prices expected to persist, management has their eyes set on achieving EBITDA of $4 billion by the end of the year.

On top of that, their debt repayment efforts are strong, with aims of repaying $2.3 billion of debt in 2021, reducing their current debt portfolio by as much as 40%.

If they manage to achieve this, it would reduce their debt to EBITDA ratio down to below one times, which is significantly lower than the industry’s average of approximately two times.

With all of this taken into account, the bulls are forecasting sales of $16.3 billion and net income of $1.4 billion by the end of the year, which coincides with adjusted EBITDA of approximately $4 billion that we just mentioned.

2) Strong Industry Growth Potential

The bulls like to put a lot of emphasis on the state of the steel industry as a strong point to own Cleveland Cliffs.

They are quick to point to both transitory and long-term trends that have a positive impact on the company.

For one, consumer demand spiked during lockdowns, as people weren’t spending money on dining out, travel and other services, but were working on renovating their homes and improving their living spaces.

All of that required steel.

The shift to electric vehicle supply and demand growing exponentially, there’s a big need for steel. Since EV batteries are so heavy, electric vehicles tend to be heavier and thus require more and higher strength steel.

There are also talks about China potentially reducing their steel exports due to their efforts of reducing CO2 emissions and improving air quality.

China has already eliminated its export rebate (form of a subsidy for Chinese steel exports), and there are rumors they might be adding export taxes as well.

This would help US steel producers increase their margins.

The push towards green power and building out the required infrastructure around that will also require steel.

The list goes on and on, but these are some of the main points the bulls focus on when pointing out the vast potential for Cleveland Cliffs in the coming months and years.

Let’s now take a look at the last bullish point.

3) The Infrastructure Deal

Then we have a big elephant in the room, being the government infrastructure plan.

The US government is planning to roll out a $1.2 trillion dollar infrastructure bill to rebuild roads, bridges, rails, airports and other key infrastructure, all of which requires steel.

But it’s not just the United States government, it’s governments around the world trying to stimulate the economy with various forms of infrastructure spending.

While the infrastructure plans in the US and the west are still in the planning stages, China stimulus spending has already been going on for months.

And because of the length of these projects, the incremental demand for structural steel will be here for years to come.

When you have the American Society of Civil Engineers grading the nation’s infrastructure as a D+, warning that its deterioration is harming the nation’s ability to compete in the global economy…

… you can be even more certain that this is not a matter of if, but when.

Now, before moving on to the bear arguments, let’s quickly recap the bullish points we’ve made in Cleveland Cliffs.

The bulls start off with CLF’s strong financial numbers… followed by the strong industry growth potential.

Lastly, the bulls believe that the government infrastructure deal is going to drum a lot of business for a company like Cleveland Cliffs.

Those were the main bullish points in CLF, but let’s now take a look at what the bears are saying…

1) Price Action of Steel

One of the main bearish concerns are the hyperinflated prices of steel that are already accounted for in CLF’s value.

Steel prices went up a lot like lumber, and they are concerned that the prices will come down and hurt Cleveland Cliffs.

Since 2020, steel prices have gone up staggering 215%!

With steel trading in the $1700-1800 range, there are reasons to be worried.

We mentioned lumber, which peaked at $1500, up 300% above its pre-pandemic levels… has crashed down over 50% since.

Can the same happen in Steel?

There are also worries about China dumping steel with their heavy exports of cheap subsidized steel that might overflood the market and thus push the steel prices down.

With that in mind, let’s take a look at the second bearish point.

2) Economic Cycle Might Hurt Commodities

We’ve noted that prices are extremely high right now and that everything is priced in.

There have also been looming concerns over inflation that may cause the Fed to raise interest rates sooner than expected.

That would hurt the commodity market, thus hurting Cleveland Cliffs.

The bears like to point out that such a “correction” would significantly hurt the stock which is already very optimistically priced.

And as we know, commodity businesses have a lengthy history of ruinous cyclicality.

To add on to this, there’s a lengthy history of global overcapacity, that combined with unwanted macroeconomic environments, would cause major problems with a company like Cleveland Cliffs.

Let’s now take a look at the last bearish point.

3) Infrastructure Deal May Not Get Passed

Just like the high steel prices staying high are priced into the stock, the same is true with the infrastructure deal.

The bulls noted that China is already executing their infrastructure build outs, while the west and the United States are still just talking about it.

What would happen if the infrastructure deal doesn’t get passed?

What would happen if there are prolonged negotiations between the parties on the infrastructure bill?

Perhaps it does get passed, but much less money is allocated towards it?

The fact that everything is already priced in at the highest levels, any deviation towards the downside might cause a significant selloff in CLF.

What might end up happening is a “boom-bust” scenario where many investors would run the risk of losing any money or gains invested in Cleveland Cliffs.

Like anything in the market, this is a possibility that the bears aren’t willing to overlook and are very quick to point out.

So, those were the main bearish points in CLF…

Let’s now take another look at the bullish & bearish points before having Felix Frey on to give us a few different trade ideas in CLF.

Bullish Points

  • Strong Financial Numbers
  • Strong Industry Growth Potential
  • The Infrastructure Deal

Bearish Points

  • Price Action of Steel
  • Economic Cycle Might Hurt Commodities
  • Infrastructure Deal May Not Get Passed

So, that was the rundown of Cleveland Cliffs, where we looked at the bullish and bearish points, but now it’s time to get Felix Frey on…

Where he’ll give us his view on the stock, lead us through the technical analysis and give us a few different options trade ideas that we can play no matter if we’re bullish or bearish…

Stay tuned, the best is about to come!

Felix Frey

Coming soon

Marko Rojnica

Thank you Felix for giving us a few different Options Trades to consider in Cleveland Cliffs…

Now, if you enjoyed the video, please leave a like 

AND if you’d like to see more stock analysis just like this one… 

make sure you subscribe to the channel and turn on the bell notifications.

Also, I would love to hear your thoughts on CLF... And I’d like YOU to add to the story. Comment your thoughts & opinions on the bullish & bearish cases we’ve made… and tell us where you think CLF is going next.

Don’t forget, OptionsGeek also has a comprehensive Options education program called 3 Steps to Profit that teaches you how to Trade Options like the Top 1%.

As a bonus, you also get 1 month free of Felix Frey’s Winning Picks Premium ideas, so make sure you check the link in the description!

Get 3 Steps to Profit + 1 Month of Free Winning Picks Premium Ideas

Thank you, I’ll see you in the next one.