Cliffs Natural Resources Inc (CLF), Alpha Natural Resources, Inc. (ANR) & Molycorp Inc (MCP): Dead-Cat Bounce or Genuine Value Opportunity?

Poster boy turns villain

Finally, Molycorp Inc (NYSE:MCP) happens to be a golden goose turned black swan. The stock is down 83% over the past 12 months, but has recovered nearly 5% in recent days. The jump in the stock appears to be on account of aluminum producer Alcoa Inc. (NYSE:AA)’s bumper earnings rather than a positive development for the company or the sector. The company produces rare earth metals, which are used in almost all products anything to do with electronics.

However, the big bet was that the company’s fortunes would go through the roof once electric vehicles were bought and sold as candies. Of course, this never happened and what we see as of now is another attempt by short-sellers to make money off this beleaguered poster boy.

Molycorp Inc (NYSE:MCP) is also a play on long-term rare earth oxide fundamentals and execution. The company has high-quality assets with a proven operating history, and the NEM-T acquisition has added downstream integration. Execution risks, declining spot prices, and an SEC investigation, however, are near-term overhangs.

However, this can be viewed differently as the company trades at nearly a 38% discount to its book value per share and a forward price-to-earnings ratio of 22,  which offers some hope. Some more help coming in from national governments is primed to help sales of electric cars.

But while it is unclear if there will be any material business repercussions from the SEC investigation, lingering uncertainties are likely to prevail until the findings are publicly disclosed.

Foolish bottom line

Overall, there appears to be nothing going in favor of these companies but it could just be the right time to start buying them. This is especially true for Molycorp Inc (NYSE:MCP), which still offers near-future hopes of profitability. However, investors would do well to keep an eye on latest quarterly earnings for indications of a turnaround before taking a plunge.

The article Dead-Cat Bounce or Genuine Value Opportunity? originally appeared on Fool.com.

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