Cleveland-Cliffs (CLF) Stock Gains On S&P News

Cleveland-Ciffs CLF Stock News

Cleveland-Cliffs Inc (NYSE: CLF) is running for the top in the market this morning, trading on gains of more than 5% early on. The gains come after the S&P Dow Jones indices announced changes to the S&P MidCap 400 and S&P SmallCap 600. Here’s what’s going on:

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CLF Stock Soars On Addition To S&P SmallCap 600

The S&P Dow Jones Indices issued a press release early this morning, announcing changes to its S&P MidCap 400 and S&P SmallCap 600. Of course, Cleveland-Cliffs was included in the update.

For CLF stock, the big part of the announcement had to do with the SmallCap 600. In the announcement the S&P Dow Jones Indices said that the stock will replace Mercury Systems in the S&P SmallCap 600 while Mercury Systems will replace Versum Materials in the S&P MidCap 400.

In the release, it was announced that the change will become effective at the open of trading on Tuesday, October 8.

Why This News Is Important

At first glance, this news may not seem to be a very big deal. After all, there are no material changes announced by the company. Nonetheless, there are multiple reasons that this news is exciting investors:

Reason #1: Validation

Not every company will make it into any of the S&P Dow Jones Indices out there. To make it into these indices, market experts must see the stock has one that has a low risk of underperformance and a high probability of outperforming others in its space.

Ultimately, the S&P is used as a benchmark as if you can match or beat returns offered, you are doing a good job in the market. Any stock, including CLF being part of this benchmark is essentially a pat on the back for the management team.

There are many sources of validation in the world of investing. However, there are few that are regarded as highly as an addition to an S&P Dow Jones Index. For Cleveland-Cliffs, that validation came today!

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Reason #2: Spotlight

The last time Cleveland Cliffs issued any material news was about two months ago. In the meantime, investors have been waiting for something exciting to happen with the company that would put it in the spotlight.

With the announcement that CLF stock will be added to the S&P SmallCap 600, the spotlight is shining brightly on the stock.

While there may not be much news ahead, there are a couple of things out there that are likely exciting investors that have picked up the ticker as a result of this news. For example, there’s a 1.4% dividend that is coming up, an unusual thing to see out of small cap stocks. Moreover, toward the end of the month, the company will be issuing its financial results, giving investors yet another catalyst to look forward to ahead.

Reason #3: Institutional Opportunities

In general, penny stocks and small cap stocks aren’t on the tradar for large, institutional investors. However, when a large source of validation shines a light on one of these stocks, we tend to see an uptick in institutional interest.

I believe that this will be the case for CLF. Over the past couple of months, CLF has seen some pain in the market, and I believe that the declines have pushed the stock cleanly into undervalued territory.

With the spotlight offered by the validation and the clar undervaluation in the stock, institutional investors could decide to pick up shares ahead!

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