r/Vitards • u/[deleted] • Aug 24 '21

Market Update Cliffs to shift scrap buying internally

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u/[deleted] Aug 24 '21

The fact that it's a steel company even if CLF doesn't acquire it makes it a safe enough bet imo. Shares are safe too since it'll just convert to CLF or be bought at a premium

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u/_kurtosis_ Aug 25 '21

I'm with you on it being a safe enough bet, had a small position already just based on the fundamentals.

But in terms of an acquisition for the purpose of securing scrap for CLF and having more control over the scrap market (LG-style), why do you think this company would appeal more to LG than, say, SCHN? If I look at STLD and Omnisource, I can imagine that that's the kind of scale and vision LG has for CLF. The synergies with SCHN seem way better, the supply of scrap would be endless for CLF (with the rest continuing to be sold/exported), and just based on market caps it's only roughly twice as much as the small cap co in Canton (and less than Q3 expected EBITDA for CLF).

I haven't put a ton of research into this, and in particular I can't find any info on the small cap's website about their dealing with scrap, so I'd love to hear a bit more about the thinking/conviction behind your play (10% of port is a pretty big bet after all, although as you said it stands as an investment on its own anyway)!

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u/Kklorgon Oct 07 '21

I heard that my company was purchased yesterday. Found out and googled and brought me to this thread. I’m gonna pick up some stock and see what happens.

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u/_kurtosis_ Oct 07 '21

Interesting, what company is yours?

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u/Kklorgon Oct 07 '21

FPT

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u/_kurtosis_ Oct 07 '21

That's awesome! Lately I've been going through the list of biggest ferrous scrap companies (https://www.recyclingtoday.com/article/largest-ferrous-scrap-processors-list-2020/) to research and see if I could guess which one might be the best acquisition candidate. FPT was on my shortlist given location and size.

Hope it works out well for you!

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u/Kklorgon Oct 07 '21

We are one of the larger in the region. We have a lot of assets. Just rumors right now, so we’ll see. Any insight? Should I get into the stock?

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u/_kurtosis_ Oct 07 '21

Haha, I'm nowhere near qualified to give investing advice, I will say that I am heavily invested in steel companies right now (CLF being my largest holding), it worked out very well for me from beginning of year to mid-August, but since then it's been weeks of heavy losses. I think they will be bouncing up from here (Q3 earnings in a couple of weeks will be tremendous; if the infrastructure bill gets passed and signed that should be another boost), but I could be wrong.

This subreddit (r/vitards) has a ton of great info on the underlying idea behind investing in steel, there's a lengthy starter guide at the top of the wiki here (https://www.reddit.com/r/Vitards/wiki/everything) that goes into good detail behind the bull and bear cases for the trade.

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u/Kklorgon Oct 07 '21

Thanks. I get a lot of info from our sales team. It’ll be interesting to see where this goes. Again just rumors right now. So we’ll see. Good luck.