Why Cliffs Natural Resources Inc Dropped 10% Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of miner Cliffs Natural Resources dropped as much as 10% today after being downgraded by an analyst.

So what: Gordon Johnson at Axiom Capital downgraded Cliffs Natural Resources' stock to a sell rating this morning and gave it a $2 price target. In downgrading the stock he praised the company's management but said a likely drop in iron ore prices will lead to worse financial results in the future. For a company that's reported hefty losses the last two quarters that's not a good sign at all.

Now what: Iron ore prices have already fallen to a six-year low as China's growth slows. The world's second largest economy consumes 60% of the world's sea bound iron ore and is by extension a huge source of demand for Cliffs Natural as well as the rest of the industry. With China's growth in question and the industry already oversupplied the future doesn't look bright.

While I don't think it's wise to sell a stock simply based on an analyst rating, in this case I think the industry's weakness and continued losses are enough to get out of Cliffs Natural Resources. There just aren't many positive signs for the future of the company's operations and losses will likely continue in 2015.

The article Why Cliffs Natural Resources Inc Dropped 10% Today originally appeared on Fool.com.

Travis Hoium has no position in any stocks mentioned. The Motley Fool owns shares of Cliffs Natural Resources. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.