I’m buying shares of mining equipment company Joy Global (JOYG) today on the strength of the good news from heavy equipment peer Caterpillar (CAT) in its second quarter earnngs report of July 21. Caterpillar significantly raised guidance for 2009, casting a strong vote in favor of a bottom being in place for the global economy. I think that puts Joy Global’s fiscal second quarter results, reported on June 3, seriously in need of an update. At that point, Joy Global announced that it had seen $161 million in cancelled orders for surface and underground mining equipment and projected that it could see another $300 million in cancellations. Revenue, likely to be in the range of $3.5 billion to $3.6 billion in fiscal 2009, could fall in 2010, the company projected, on risk in segments that the company defined as Russia, Canada’s oil sands, iron ore, copper and metalurgical coal. Since then, rising commodity prices argue that the risks from iron ore and copper are way down and Caterpillar’s results say that the whole sector is improving more quickly than expected. In my opinion Joy Global’s June 3 report was a bottom for the company and the sector. I’m adding the shares to Jubak’s Picks with a target price of $48 a share by June 2010. (Full disclosure: I will buy shares of Joy Global for my personal account three days after this “buy” is posted.)
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On what sectors from the book to buy now: I’d be looking at early cycle companies in the commodity business–JOYG, for example–companies with big exposure to faster growing emerging economies such as Brazil, India, and China (although you’ve got to watch valuations here. China is insanely priced again), and increasing exposure to agriculture. But all very, very carefully.
On Yara International: We didn’t exactly make a seamless transition from MSN Money’s portfolios to the ones we built for this site. We missed a few and Yara was one of them. We’ll get it back in the portfolio as quickly as we can.
Jim, What happened to your Yara Intl pick? I don’t see it in your current pick list and I don’t recall seeing a sell recommendation.
Bucyrus (BUCY) looks like a complimentary play under these conditions as well. JOYG has a better yield.
I agree with skllstrm. I am confused about which stocks from the Jubak Picks book I should be invested in now.
Jim, I wonder what sectors from your book you are currently recommending? I am sitting on a lot of cash and would like to start investing in some of your Pick 50 stocks.