Discussion in 'Stocks' started by ByLoSellHi, Apr 26, 2007.

  1. I am rather bullish on this company, as it has very good fundamentals, is back on an uptrend, is the #1 producer of equipment and machinery used in mining operations (coal, copper, etc.), and should be a huge beneficiary of the favorable exchange rate that foreign companies have when buying U.S. products.

    The nice thing about JOYG is that their really is no correlation between the price of what is being mined, and the need for the equipment and machinery JOYG manufacturers and exports, because things like coal and copper will be required at a rather stable amount, regardless of what happens with the price of the underlying material.

    I am not that intelligent, so I look for opportunities whereby my common sense is easily satisfied. My common sense tells me that in order to improve the production of the cheap power that emerging economies need, they will have to make their coal mining operations far more efficient.

    I do realize there is much talk of alternative energy, but coal is the predominate material used to produce electricity in the emerging economies, and will likely be for a long time to come (whether adequate technology can brought to market to improve air quality by reducing the emissions of coal burning power plants is an interesting, but separate, investment thesis).

    I opened up a position in JOYG, and plan on keeping it in my long term portfolio.
  2. hels02


    Well, I took a quick look, and it seems this is moving more from Barron's pumping it than anything else...

    It missed analyst's estimates by $.09 last quarter, coming in at $.51 rather than the expected $.60. This isn't that bad, given how terrible coal has been doing, and it's still above same quarter last year.

    I can't pull up an S&P Report for it... it doesn't have one? Generally, I refuse to buy a stock that S&P won't bother even tracking for a buy-hold... only for spec plays. This is odd, because JOYG supposedly commands 60% of the coal mining equipment market.

    The PE is already 15... pretty high for a no-name stock in one of the worst industries of the last year. It does have a VERY high growth rate that might justify the multiples tho, and eventually coal HAS to do something, it's still profitable, just not a hot sector for the moment, but who knows when that might be? Sectors can do poorly for many many years at a time.

    Might be good for a long term hold, but there are better choices out there I think.

    It seems the best thing going for this right now is Barron's article. And I've already said that by the time an article is written, SOMEONE is pumping it for a reason, but the pump does typically move a dead stock for a short time. Also, volume is pretty low... the biggest move was Monday when the article came out... then it petered off again.
  3. hels -

    JOYG is the #1 manufacturer of mining equipment in the world. It produces highly specialized equipment, and dominates the playing field in terms of market share.

    It has a market cap of nearly 6 billion, placing it firmly in the mid cap arena, on approximately 570 million in revenues, and enjoys 30% gross revenue margins, a 60% ROE, and eps growth of 130%.

    There aren't many capital machinery manufacturers with those kinds of numbers.

    It has a stellar balance sheet with a current ratio of 2.35, a P/E of 15 (which is not expensive at all given eps growth), and p/s ratio of 2.3x based on last quarter's results.

    This company is essentially a specialized, smaller CAT, and should benefit to an even greater degree (because of its higher % dominance of the mining equipment market) from capital machinery purchases from abroad than CAT did this past quarter, given that coal pricing has stabilized, and is now rising, and now that China has become a net importer of coal for the first time in history.

    It is rare to find a company that produces such specialized equipment with so few competitors, and that enjoys such a clean balance sheet and high eps growth rate, IMO.

    We'll know in May whether the same global hunger for sourcing raw commodities and materials has benefited JOYG to the same degree it did CAT. I place a bet that it did, and even to a larger degree, given the supply/demand situation of mined products.

    The favorable USD exchange rate is the icing on the cake that should sweet JOYGs revenues and margins.
  4. hels02


    BuyLo - I said it had 60% of the market. Because I haven't really looked, of that 60%, how much of it is domestic and how much International?

    China importing coal doesn't mean it's importing it from the US, or using equipment made by JOYG, or that coal mining is an expanding industry... how often is coal equipment replaced?

    I do agree coal is underpriced and undervalued atm. Further, I've seen several writers pumping it lately, not just Barrons, they may just bring about more interest in the sector, which would bring more interest to JOYG.

    Thing is, their bottom line isn't growing much per their last quarterly. While the stock market may be more interested in coal and coal related companies because of the poor performance over the last year, there still has to be some growth justification for buying it. And again, last quarter wasn't very good.

    Comparing to CAT isn't fair... CAT went right to China with their plant and started selling from there. They were in the right place at the right time.

    Is JOYG making mining equipment in China to sell to the Chinese coal mines?

    Is coal mining equipment comparable to machinery used in everything from agricultural tractors (where even 10 years ago, Chinese farmers were plowing fields with an ox and a plow) to site work backhoe's to skyscraper cranes? CAT's equipment cuts across all sectors, not one.

    I'm not saying JOYG is a bad buy, just playing devil's advocate here, with a few more things to consider.
  5. JOYG is known for making those giant shovels that the oil sand miners use.

    There will be demand for these for a long long time.

    The market doesn't like to give this stock a multiple to match its growth rate for some reason...

    Haven't traded it a while; but its a good mover.
  6. And they make those giant 'teethed' combers for coal extraction.

    The more I discover about this company, the more I like it.

    Hels - over 50% of their sales are derived from overseas.
  7. [​IMG]


    April 29, 2007

    There's an old Forty-Niner saying that the folks who got rich in the gold rush were the ones selling picks and shovels.

    Joy Global (JOYG) is the world's largest maker of mining equipment like monster-sized mechanized shovels. Strong global economic growth has boosted demand for coal, copper and iron ore, creating a lot of business for such gear. Yet Joy Global's shares have slid from a high around $72 in April 2006 to about $50.

    The main culprit: soft coal prices, brought on by an inventory buildup after intermittent spells of warm winter weather. U.S. coal miners -- who provide 40% to 45% of Joy Global's revenue -- have cut spending.
    [Joy Global]

    Yet coal isn't the Milwaukee-based outfit's only story. Several sustainable global-growth trends should drive the stock higher -- by 30% or more -- over the next couple of years, according to institutional investors who've been loading up on the shares.

    For one thing, colder winters will occur in North America again, contends Chris Armbruster, an analyst at Al Frank Asset Management, which has bought shares recently. For another, there are early indications that Joy Global's prospects are turning around.

    Chief Executive Officer Michael Sutherlin says that U.S. electric demand is up 5% this year, while coal inventories have dropped to a 40-day supply from 50. Coal prices are likely to stabilize and then rise as 2007 progresses. Stocks of coal producers are up about 20% this year, after falling some 25% in 2006's second half.

    Joy Global garners more than 50% of its sales overseas, from places like China, South Africa and Australia.

    In its October-ended fiscal 2006, it had $307 million in revenue from emerging markets, double the level two years earlier. The company expects China alone to account for $500 million in sales by 2010. In fiscal 2006, Joy Global had $2.4 billion in revenue and earnings of $3.38 a share, up 25% and 180%, respectively, from 2005's figures. By 2009 or 2010, the company's fans expect it to earn close to $4 a share.

    "Our international customers continue to make long-term investments and commitments running out to 2010-2012," says Mr. Sutherlin.

    Says Hester Capital Management analyst Jeremy Blackman: "The global demand for coal, iron ore and copper is far outstripping the mine supply." Hester has been adding shares of Joy Global to its established positions.

    The drop in Joy Global's shares over the past year has made them cheap, says Alexander Roepers, president of Atlantic Investment Management.

    Sales growth is likely to be in the low-double-digit range, while annual per-share earnings should rise about 20%, on average, in 2007 through 2009, he asserts. His firm has been adding shares, and now has a 5.2% stake in Joy Global.

    He figures the stock is worth at least "in the mid-60s," using a price-earnings ratio of 15 times the "over $4 per share" he expects the company to earn in 2009.
  8. 20% in a month on this.

    Not a bad move for such a short time frame.

    I may cut my position down, and book some profits, and let the rest run.