Shares of Cleveland-Cliffs Inc (NYSE: CLF) are down more than 25% in January, but Cerity Partners’ Jim Lebenthal is convinced it’s a stock that will outperform the benchmark S&P 500 index in 2022.
Lebenthal defends his bullish call on CNBC
Lebenthal agreed that the mining company is likely to face volatility this year but expressed confidence in the strength of its fundamentals. On CNBC’s “Halftime Report”, he said:
It’s a stock that before the pandemic had four times the return of the S&P 500. I think it’s going to beat the benchmark mightily over the next year, but with that sort of return comes volatility. You can’t have those returns without some breathtaking dips.
Lebenthal’s bullish call is particularly interesting since Cleveland-Cliffs already had a fantastic 2021 that ended with a close to 50% gain in the stock price. In October, the Ohio-based company secured a new source of raw materials with a $775 million acquisition of Ferrous Processing & Trading Co.
There’s plenty to like about Cleveland-Cliffs
Also on Friday, Intel said it will build a $20 billion computer chip facility in Ohio that Lebenthal sees as another positive catalyst for Cleveland-Cliffs. He added:
Some people will say steel prices are down by 25% from their recent highs. But remember that iron-ore prices are down 40%, which means margins are expanding, and volume is picking up, as autos get produced, and infrastructure gets spent.
Other notable reasons why he’s bullish on the stock include the strength of the company’s free cash flow and the fact that it’s about to launch a sizable stock repurchase programme. The $8.68 billion firm traded at a PE multiple of 4.47.
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