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Mining machine provider Bucyrus International (BUCY), first discussed here on June 22, 2009 at a price of $25.37, is one of those rare plays, so close attention is advised. Bucyrus was stopped-out in June at the raised sell/stop loss of $46, good for a roughly 80% gain.
If you didn't raise the sell/stop loss back in June, you notched an even bigger gain, as Bucyrus has surged to about $75 since late spring.
If you did raise the sell/stop loss, the calculation here is to consider re-establishing at least a 50% position with BUCY. Re-establishing a position is rare, but Bucyrus is worth the risk.
Look for Bucyrus to continue to benefit from the developing world's enormous infrastructure needs, as the global economic recovery progresses. Bucyrus reported better than 70% order growth in the second quarter, something that should help push revenue 20% to 25% higher in 2010, including revenue from recently acquired Terex.
Further, while there is some climate change risk depending on what happens to coal's status, investors should keep in mind that BUCY's equipment is also used to mine copper, as well as oil sands operations.
The Thomson Reuters First Call FY2010/FY2011 EPS estimates for STD are $4.09 to $5.24. Each EPS estimate looks about 5% low, according to my analysis.
Technically, as noted, Bucyrus over-corrected in late spring, taking out the $46 sell/stop loss, then rose about 30 points in four months.
2010 Outlook: I view Bucyrus as a long-term play, but if investors are looking to sell BUCY within the year, it's probably best to take your profits after it rises to $83-85, if it fails to rise above $87.
Stock Analysis: I consider Bucyrus International 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 50% position in BUCY now. Under any circumstance, I wouldn't buy more than 50% of my BUCY position before December 2010 and I'd put a sell/stop loss at: $46.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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