Joy Global's Train Is Leaving the Station

Posted Oct 12th 2010 2:30PM by Joseph Lazzaro
Filed under: Stocks to Buy

This may be your last chance to scoop-up shares of Joy Global (JOYG), first discussed here on June 15, 2009 at a price of $38.05, and earn an out-sized gain during the current economic expansion.

JOYG, a manufacturer and servicer of mining equipment, is on-track to capitalize on the development of emerging markets, and that should drive impressive gains in orders, revenue, and margins.

Joy's management has prudently restructured production capacity to meet slower growth conditions, and also transferred production to lower-cost regions. Joy's shares should outperform the Dow and S&P, assuming credit markets continue to heal.

The Thomson Reuters First Call FY2010/FY2011 EPS estimates for JOYG are $4.16 to $4.80.

Technically, Joy Global's chart is strong -- an uptrend. There were two dips below the key, 50-day moving average this summer, but since retaking the $60 level, JOYG has accelerated to clear $70 resistance -- a bullish pattern.

2010 Outlook: I view Joy as a long-term play, but if investors are looking to sell JOYG within the year, it's probably best to take your profits after it rises to $82-84, if it fails to rise above $85.

Also, the sell/stop loss has been raised to $48 from $38, making this a profitable trade for your June 2009-bought shares.

Stock Analysis: I consider Joy Global to be a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, I'd 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, I wouldn't buy more than 75% of my JOYG position before December 2010 and I'd put a sell/stop loss at: $48.

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

Tags: Joy Global, JOYG