The call back in June was that shares of Bucyrus International (NASDAQ: BUCY), provider of machines for infrastructure work and mining, would benefit from the developing world's enormous infrastructure needs, as the global economic recovery commenced. And so far, so good, hence I'm Reiterating my Buy rating for Bucyrus International, first recommended on June 22, 2009 at a price of $25.37. If you bought BUCY in June, you're up an impressive 45%.
Bucyrus was another one of those companies that was rudely treated by Wall Street with the onset of the global recession - to say the least - with shares hammered from a high around $80 to about $11. Rational? Hardly.
The view from here has argued since June that the projected cutback in coal, metal, mining activity in FY2010 is off the mark, and that an substantial increase in mining activity will occur. Institutional investors are thinking the same thing, having bid-up BUCY's shares since March. To be sure, BUCY is not as cheap as it was in June, but the risk/return remains tipped decidedly toward the Buy. The First Call FY2009/FY2010 EPS estimates for BUCY are $3.50 to $2.20.
Technically, BUCY's stock chart is strong: an uptrend, with only minor, constructive corrections, and the stock has only briefly breached the 50-day moving average. There will be psychological resistance at $40 and $50, but these will be overcome on BUCY's likely journey much farther north.
Stock Analysis: Bucyrus International is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in BUCY now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your BUCY position before December 2009. Sell/Stop Loss if you were to buy shares in this company: $13.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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