Posted May 02, 2022
By Matt Insley
“Inflation continues to be a major problem that we’re going to be talking about for months (if not years),” says our retirement-and-income specialist Zach Scheidt.
“But some companies are helping to reduce inflation — and booking large profits at the same time,” he adds.
“The company I want to introduce to you today is Cleveland-Cliffs Inc. (CLF), an all-American steel company operating in the heart of the American Rust Belt.
“Shares of CLF jumped higher [last week] after the company released a very strong earnings report,” Zach continues. For the first quarter of 2022, the company earned $1.71 per share, well above the $1.44 that Wall Street was expecting.
“So what drove such a strong jump in profits? Cleveland-Cliffs’ business actually benefits from inflation. And I’m impressed with the way the company is building long-term profits into its business expectations for many quarters to come.
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Your Rundown for Monday, May 2, 2022...
“On one side of its business… Cleveland-Cliffs is the largest supplier of steel to the U.S. automotive industry,” Zach says.
“Demand for new cars is extremely high, and companies like Ford, GM and even Tesla are pushing as many cars through their factories as possible.
“And that means car manufacturers need to buy steel… a lot of steel! Meanwhile, now that Russian steel is largely off the global market, there’s a lot less steel available.” So steel shortages alongside high demand mean higher prices.
“CLF will continue to receive premium prices for steel it delivers to key customers, which should keep the company’s sales high for quite some time,” Zach notes. “Of course, high sales only help when companies can keep their costs under control. Which brings me to another key CLF strength…
“While many of CLF’s competitors are scrambling to find affordable iron ore” — a necessary material for steel manufacturing — “CLF has a huge advantage,” says Zach.
“Cleveland-Cliffs has access to some of the best local mines for iron ore situated very close to the Great Lakes region,” he says. “Since CLF doesn’t have to import iron ore from overseas or find another source, the company can keep costs relatively stable.
“And lest you think we’re late to the party on this one, keep in mind that CLF can move substantially higher when the company’s business is working well. Just look at CLF’s long-term stock chart…
Source: Rich Retirement Letter
“CLF hit a high near $120 back in 2008 when investors were worried about potential inflation following the Fed’s response to the financial crisis,” says Zach. “I don’t know if CLF will get back to $120. But even covering half of that ground would still give you a great return from today’s level ($26.50).
“Consider adding this ‘inflation buster’ to your investment account today,” Zach concludes, “to grow your wealth and give you the resources to enjoy the things that are important to you and your family.”
Market Rundown for Monday, May 2, 2022
S&P 500 futures are up 0.45% to 4,145.
Oil is down 3.10% to $101.43 for a barrel of WTI.
Gold’s down 1.7% per ounce to $1,879.60.
And flagship Bitcoin is up 2.3% to $38,700.
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We’ll have more to say Wednesday; until then, take care!
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