Joy Global really likes the recovery in emerging markets

Posted Dec 16th 2009 3:00PM by Joseph Lazzaro
Filed under: Stocks to Buy

Joy Global Inc. (JOYG), manufacturer and servicer of mining equipment, is on-track to capitalize on the development of emerging markets, which is a major reason I'm reiterating my buy rating for the company's shares, first recommended on June 15, 2009 at a price of $38.05. If you bought JOYG in June, you're up about 40%.

When the global economic expansion hits take-off stage, it will most likely be led by emerging markets, who are building-out their infrastructure networks and using more energy on a per capita basis, yearly. And that means they'll need mining equipment, which benefits JOYG. Firmness in the commodity market provides an additional tailwind.

The First Call FY2009/FY2010 EPS estimates for JOYG are $4.22 to $2.68. Obviously, the view from here argues that the $2.68 FY2010 EPS estimate is way, too low.

Technically, Joy Global's stock chart looks beautiful: a strong uptrend, with only minor, corrective pull-backs, and a stock price that's almost always above the 50-day moving average -- which indicates institutional investors are adding to or establishing positions. Further, the stock's recent pull-back from $60 represents a buy opportunity.

Finally, the Sell/Stop Loss has been raised to $38, or to just below cost, from $22. Hence, this is an essentially zero-risk trade for your June-bought shares.

Stock Analysis: Joy Global Inc. is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in JOYG 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 75% of your JOYG position before February 2010. Revised Sell/Stop Loss if you bought shares in this company: $38.

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

Tags: Joy Global, JOYG