Joy Global's train is leaving the station

Posted Jun 15th 2009 5:20PM by Joseph Lazzaro
Filed under: Stocks to Buy

Joy Global appears to be turning the corner, hence a Buy rating has been generated here, with a tight Sell/Stop Loss.

Institutional investors have recently bid-up shares on the thesis that the global recession is bottoming, which would mean good things for mining equipment supplier Joy Global (Nasdaq: JOYB).

Shares have rocketed to about $40 from roughly $25 in two months, and have pulled-back recently, hence now is good time to get on-board this train, which appears to be headed north.

Moreover, any hint that global economic conditions will improve sooner than the discounted Q4 period will send the next wave of investors into JOYG, and the current P/E of about 10 is preferred. More than 50% of JOYG's revenue is generated outside the U.S. The First Call FY2009/FY2010 EPS estimates for JOYG are $3.92 to $2.37.

Stock Analysis: Joy Global is a moderate-risk stock. Consider buying a 25% position in JOYG now, then buy another 25% in four months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your JOYG position before October 2009. Sell/Stop Loss if you were to buy shares in this company: $22.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

Tags: Joy Global, JOYG, mining equipment, MiningEquipment