Prepared by Tara, Senior Analyst at BAD BEAT Investing
Hello all. Last week we share how we closed out another rapid return trade and see more upside in the name. The name we just closed a trade on was Texas Pacific Land (TPL). We got folks in at $1180 and out at $1365. Solid.
When Other's Panic, Winners Pounce. Buy Some Shares In This Diversified Land Play (NYSE:TPL) | BAD BEAT Investing | Seeking Alpha Investing Groups
This week, we closed out THREE more trades, including our top 2025 pick. We close out trades in (MGM) (CLF) and (UBER).
A Top 2025 Pick (NYSE:UBER) | BAD BEAT Investing | Seeking Alpha Investing Groups
The gains were for 17%, 21%, and 33% respectively. The UBER trade was held for 6 weeks, and CLF 4 weeks. MGM took time to get the position to the price we flagged, but was a solid return, running from a basis of 33.99 to $40.
We have a few recent ideas which are all coming down into their buy zones, and some you can get a better initial price then we had. Plus, our NEXT idea will be issued either this afternoon or tomorrow morning. We KNOW there is long-term sustainable upside in these names and have let some of the profit run in each for a life-time ahead, helping to build generational wealth. Trade, sell, and then hold some. We are changing the game of investing or new and old investors alike. Because of this strong week, and because we were recently left a review, we have reactivated the opportunity to join Seeking Alpha's premier group at $225 off the current price, with a money back guarantee if you are not satisfied! We are doing this for the next 2 members to join only, and this deal will be locked.
Sure I will check it out! (click to start WINNING)
Here is the review:
There is a lot going on there but here is the transcript:
What this team has put together is worth every single cent and so much more. Look, are you tired of watching your portfolio stagnate while others reap the rewards of smart investing and trading? Do you dream of achieving true financial freedom, but feel lost in the complex world of Wall Street? Then it's time to stop dreaming and start doing with BAD BEAT Investing!
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I've been in the market for years, trying different services, reading countless books, and even attempting to time the market myself. Let me tell you, it's a warzone out there. Information overload, conflicting advice, and the constant fear of making the wrong move can paralyze even the most seasoned investor. I was stuck in a cycle of small gains and frustrating losses, feeling like I was missing out on the real opportunities. Then I discovered BAD BEAT Investing.
From the moment I joined, I was blown away by the sheer quality and actionable insights they provide. This isn't your typical fluff operation or a group of talking heads spouting vague predictions. BAD BEAT Investing is a community of dedicated analysts and expert traders who live and breathe the market. They do the hard work so you don't have to, providing clear, concise, and data-driven recommendations that cut through the noise and pinpoint the real profit potential. What sets BAD BEAT Investing apart? Unparalleled research for one. Forget skimming headlines and relying on gut feelings. The team at BAD BEAT Investing dives pretty darn deep, conducting rigorous fundamental and technical analysis to identify undervalued assets with explosive growth potential. They leave no stone unturned, providing members with comprehensive reports that explain the "why" behind every pick. Second, very clear guidance one where to get in and out. No more second-guessing or missed opportunities. BAD BEAT Investing delivers real-time trade alerts directly to your inbox and mobile device about one a week, sometimes more, ensuring you're always in the loop and can act quickly. Outside a few very timely trades occasionally posted in chat, the investment ideas are carefully curated pieces based on their in-depth research. I also love their expert daily guidance they provide members and the community support.
One thing I have learned is that investing can be a pretty lonely journey, especially when you are losing!....But not with BAD BEAT Investing. You gain access to a vibrant community of like-minded investors, where you can share ideas, ask questions, and learn from the collective wisdom of experienced traders. The team is also incredibly responsive, responding in real time quickly. Finally they have the proven track record. I backtested many of their ideas the last few years. Nearly 9 out of 10 lead to gains. Sure, there are some picks that do not work out, but more often than not, it is gains, gains, gains. Talk is cheap. BAD BEAT Investing has the record of success. They've consistently outperformed. Don't just take my word for it! Check out their performance and see the results for yourself! If you're serious about taking your investing to the next level, BAD BEAT Investing is the only service you'll ever need. They've given me the confidence and tools to finally achieve my financial goals. I'm no longer just a passive observer in the market; I'm an active participant, making informed decisions and seeing real results. Don't wait any longer. Join BAD BEAT Investing today and unlock the true potential of your portfolio. This is your chance to break free from mediocrity and experience the financial freedom you deserve. Invest in yourself, invest in your future, invest in BAD BEAT Investing.
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This is one of the longer reviews we have seen, and whether a review is good like in this case, or is poor (our last negative review was in late 2020) we always offer this flash sale. Much better deals then you can normally get through the public articles.
Why consider trying it?
First there is crystal clear tracking of entry and exits in a google tracker for transparency. We also list the last few years of house positions, trades we closed but let profit run, generating incredible returns, something we teach you how to do. We offer insights into market action, including the shift in sentiment we are seeing now. We provide you a weekend update with next week's game plan. We offer one exclusive, in depth research article with an investment idea each week (on average), and occasional quick trades' as well in chat. Plus, we answer all of your inquiries during market hours via our support staff, along with offering you dozens of investing tools. All this for less than $1 a day with this special discount. Oh, and if you are not happy, there is a money-back guarantee. Join Seeking Alpha's premier service before prices rise at this special discount!
Not only do we close out of (TPL) last week, plus UBER, MGM, and CLF, our first two trades of 2025 were closed for double digit gains:
2024 saw 40 trades successfully closed, and 6 stopped, with a few trades open carrying over into 2025 (one of which MGM was jsut closed). We are looking forward to a prosperous 2025, and hope you will join us through this special offer.
Here is more of why we see sustained upside in CLF
It has been a tough go for a lot of steel names. In December 2023, a significant event unfolded in the global steel industry: Nippon Steel Corporation (OTCPK:NPSCY), a leading Japanese steel manufacturer, announced its intention to acquire United States Steel Corporation (X), an iconic American steel producer that we have had a house position in for years after getting members into the stock at $8 years ago. This proposed acquisition, valued at $14.9 billion, would have seen U.S. Steel become a wholly-owned subsidiary of Nippon Steel. The deal generated considerable interest and speculation. Under the terms of the agreement, U.S. Steel would maintain its name and headquarters in Pittsburgh, Pennsylvania, a city synonymous with the American steel industry. Notably, Nippon Steel pledged to honor existing labor agreements with the United Steelworkers union, a crucial aspect for maintaining stability within the workforce. This commitment aimed to allay concerns about potential job losses or adverse impacts on employee conditions. Another name we had traded in the past was Cleveland Cliffs (CLF) an extremely volatile name, was also interested in making the purchase.
Now, the rationale behind this ambitious acquisition was clear: to create a global steel behemoth, regardless of which company achieved the purchase agreement. Ultimate US Steel elected to go with US steel. By combining the strengths of both companies, Nippon Steel sought to enhance its competitive position in the increasingly challenging global steel market. This would involve leveraging U.S. Steel's strong presence in the North American market, while simultaneously benefiting from Nippon Steel's advanced technologies and global reach.
The proposed merger garnered significant attention from various stakeholders. Shareholders of U.S. Steel overwhelmingly approved the acquisition, recognizing the potential benefits of the deal. However, the transaction faced considerable scrutiny from the U.S. Department of Justice (DOJ) due to potential antitrust concerns. The DOJ conducted a thorough investigation to assess the potential impact of the merger on competition within the U.S. steel market.
Ultimately, the DOJ blocked the merger, citing concerns that it would substantially lessen competition within the U.S. steel market. This decision effectively ended the proposed acquisition, despite the strong support from U.S. Steel shareholders.
The failed merger serves as a reminder of the complexities and challenges involved in large-scale corporate acquisitions, particularly those with significant implications for national economies and industries. While the proposed deal aimed to create a global steel leader, concerns about its potential impact on competition ultimately led to its demise. While there are lawsuits in place challenging it, Cleveland-Cliffs (CLF) CEO Lourenco Goncalves who said he would be interested in buying if the deal with Nippon fell through, appeared to be less interested in a US Steel deal after saying for months he was interest. He stated:
"President Trump will change the backdrop of the entire industry. I'm not so sure if the best outcome is the combination of Cliffs and US Steel. Maybe the best outcome is Cliffs stays standalone and US Steel stays standalone and you continue to compete."
The comments come after a report that Cliffs remains on the sidelines for a potential bid for all or parts of US Steel as it's too expensive for the steelmaker. With US Steel shares trading in the low $30s a share, the company is too pricey for Cliffs to make an offer with a standard deal premium, according to that report. Keep in mind however this came after Cliffs decided to buy Stelco. That deal significantly expanded its footprint in 2024 through the acquisition of Stelco Holdings Inc. This strategic move solidified Cleveland-Cliffs' position as the largest flat-rolled steel producer in North America. The acquisition of Stelco offered several key advantages for Cleveland-Cliffs. Firstly, it significantly diversified the company's end-markets. By incorporating Stelco's customer base and product lines, Cleveland-Cliffs gained access to new sectors and increased its overall market reach. Secondly, the deal expanded Cleveland-Cliffs' geographical presence into Canada, broadening its operational scope and allowing for better access to Canadian markets. Furthermore, the acquisition was expected to yield substantial cost synergies. By integrating the operations of both companies, Cleveland-Cliffs aimed to achieve economies of scale, streamline production processes, and optimize resource allocation. This integration would contribute to a more efficient and cost-effective overall operation.
The terms of the acquisition involved a combination of cash and Cleveland-Cliffs common stock for Stelco shareholders. Importantly, Stelco would continue to operate as a wholly-owned subsidiary of Cleveland-Cliffs, preserving its name and the legacy it has built within the Canadian steel industry. This approach aimed to maintain the valuable brand equity associated with the Stelco name while integrating the company's operations into the broader Cleveland-Cliffs framework. Cleveland-Cliffs emphasized the strategic importance of this acquisition in reinforcing its commitment to integrated steelmaking and supporting well-paying union jobs within North America. The company viewed the acquisition as a crucial step in strengthening its competitive position within the North American steel market, enabling it to better serve its customers and contribute to the economic growth of the region. After this major deal, perhaps the balance sheet would not support a purchase of X. But it created a massive North American presence with a complete low-risk supply chain.
With this combination, the company expects $120 million in first-year cost synergies. Unlike prior acquisitions of AK Steel and ArcelorMittal USA, Stelco is a well-performing asset that does not require a lot of work. This should lead adjusted EBITDA margin profile of roughly 11% in this environment, including the $120 million in first-year synergies.
I walked you through all of that so you had some historical backdrop. Look, steel is under pressure thanks to a downturn in steel pricing. This is a very cyclical sector. But we do believe the new administration will be favorable for steel. Particularly American made steel. Cliffs stock has been knocked down hard, but looks like it is trying to base out after hitting the single-digits.
The recent chart action suggests a basing out is in play, and when looking to the long term chart there is reason to suspect some support in this range provided there is an uptick in steel pricing. As we know, when steel prices fall like this, earnings collapse and the stock gets nailed. This is what has happened.
That is some pain just in the last year and next few quarter estimates.
However, we want to buy on the weakness, as we see demand strong and bolstered by the new admin's policies. And not to capitalize on tragedy but a lot of vehicles and structures were destroyed in the California wildfires. rebuilding efforts will require materials. Steel is a low pin action play, but a play. The auto market is important for CLF, and demand has been low of late. When the next uptick occurs, this will be very bullish.
Further discussion
Make no mistake, we believe in buying low, and selling high, predominately. Of course we do have momentum trades, but this is more of a classic play from our play book, getting in front of a cyclical upswing. The single-digits presents a good opportunity all things considered with the size of the new CLF.
Now, looking back to Q3 (Q4 will be out soon), Cleveland-Cliffs generated $124 million in adjusted EBITDA. This was based on 3.8 million tons of steel shipments. As we can see below, the biggest headwind came from pricing pressure, as the average selling price was barely above $1,000 per ton. That is lower than it has been in some time.
Of course, volumes were lower as well on this. Suggesting demand dipped along with pricing. One positive is expenses fell, but as you can see EBITDA took it on the chin. It is expected the next two quarters see pain as well. As mentioned a headwind came from the automotive industry, as direct automotive sales accounted for 30% of revenue. According to management, build rates were the lowest since the depths of the semiconductor shortage during the pandemic, when automotive producers were unable to turn orders into finished products. Now, the latest expectation for automotive builds this year is around 15.5 million units, which is about 1 million units less than what was expected at this time last year. The nonautomotive business also saw continued weakness in demand and pricing, both in flat-rolled and plate sales. So, this is why shares have been nailed.
So to adapt right now, Cleveland-Cliffs made a number of strategic adjustments. This is interesting, to save money for now. One of the biggest steps idling a blast furnace at its Cleveland facility. This decision was made to better align production with lower orders, while saving operational expense. According to the company, this action reduced its annual capacity by about 1.5 million net tons. When the market picks up it will resume operations at the furnace. In general, Cleveland-Cliffs is doing a good job cutting costs in our opinion, as it lowered per-unit costs by more than $40 per ton, more than initially expected, and supported despite running its mills at reduced rates. For 2025, it targets $600 million in standalone capital expenditures, a number that consists of $500 million in sustaining/maintenance CapEx and $100 million in strategic projects.
While competition is always an issue, one of the the major issues is the steel flooding from nations like China, which often produces low-quality steel with the purpose of supporting domestic employment. It is hard to compete with these practices as it hurts pricing and creates cheaper competition. One other risk is that Canada, a nation Cleveland-Cliffs entered by buying Stelco earlier this year, will face some tariffs too. How this impacts the domestic operations is unclear. The deal was made to diversify its operations and comes with cost advantages like lower healthcare, energy, and iron ore costs. It is a net positive. In general, The Stelco deal improves CLF's already impressive supply chain. It also adds a wide range of high-quality steel products to its portfolio. Overall now, the new company has a super low risk internal supply chain that involves high-quality iron ore and short distances between facilities. This benefits both CLF and the United States from a national security point of view.
As for valuation, it really is all about steel pricing. However it is undervalued relative to itself the last 5 years as the revenue and earnings power has taken a temporary dip.
So, on an EV/EBITDA and EV/sales basis, as well as a price to book, shares are attractive. We do think steel is approaching a low, and suspect the incoming administration will be positive for domestic steel. If we get even only half of the bump we expect, it would be bullish. Analysts expect possible $3,00 in per-share operating cash flow by 2026. Applying just a 5X multiple to the long-term average, suggests a price of $16 bucks is likely 60% above the current price. With our targets, we are looking for 20% returns roughly. A conservative view.
Of course, this is not without risks. As I have mentioned a number of times already, the steel industry is inherently cyclical, heavily influenced by economic fluctuations. Periods of robust economic growth often translate to increased demand for steel, benefiting companies like Cleveland-Cliffs. Right now we are in a strong economy. Oddly, as mentioned in the market briefing, the hot economy has weakened stocks due to fears the Fed wont cut rates much this year. That is odd. The REAL RISK is if we see a strong economic downturn, because in this case, construction activity slows, manufacturing output declines, and overall demand for steel weakens, negatively impacting the company's profitability. That is the biggest headwind. It will lead to lower steel prices. That is the second risk, which is clear, the steel price. Steel prices are subject to significant volatility, influenced by factors such as global supply and demand, raw material costs (primarily iron ore), energy prices, and geopolitical events. A sharp decline in steel prices can severely impact Cleveland-Cliffs' revenue and profitability, potentially eroding shareholder value.
We also know there is competition. The global steel industry is fiercely competitive, with players ranging from large multinational corporations to smaller regional producers. Cleveland-Cliffs faces competition from both domestic and international rivals, including companies with lower production costs or access to cheaper raw materials. Intense competition can pressure profit margins and limit pricing power. Regulatory risks exist, though we expect a more favorable environment going forward. Still, the steel industry is subject to a complex web of regulations, including environmental regulations, trade restrictions (such as tariffs and quotas), and labor laws. Changes in these regulations, such as stricter environmental standards or increased trade protectionism, could significantly impact Cleveland-Cliffs' operations and profitability. With all of the deals having been made integration risks persist. As Cleveland-Cliffs continues to expand through acquisitions, such as the acquisition of Stelco, there are inherent integration risks. Successfully integrating acquired companies can be challenging and time-consuming, requiring careful planning and execution. Integration issues could lead to operational disruptions, higher-than-expected costs, and difficulties in achieving anticipated synergies.
Another source of headwinds are labor relations. These can be a significant factor in the steel industry. Potential labor disputes, such as strikes or work stoppages, can disrupt production, increase costs, and negatively impact the company's financial performance. Then there is fiscal leverage. Cleveland-Cliffs utilizes significant debt to finance its operations and acquisitions. While debt can be used to fuel growth, it also increases financial risk. High levels of debt can make the company more vulnerable to economic downturns, rising interest rates, and unexpected events that could impact its ability to meet its debt obligations. Finally, investment in technology is expensive. Cleveland-Cliffs must continually invest in research and development and adapt to new technologies to remain competitive. Failure to do so could erode its competitive advantage and hinder its long-term growth prospects.
However, with likely Tariffs helping domestic steel makers, the rebound in steel prices, and the moves being made, not only do we see 20% upside plus in our trade, but think you can see a double this year.
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