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Joy Global, Inc. Message Board

  • market_logic2010 market_logic2010 Sep 2, 2010 12:57 PM Flag

    Buy BUCY or JOYG or both?

    New to this group. Experts please give plusses and minuses for each. Thanks.

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    • Both.

      First, lets clear some myths - JOY and BUCY do not collectively own 80% of the mining equipment market. They own about 8% of the market. The mining equipment market is all the shovels, drills, draglines, trucks, repair contracts, etc - the capital equipment miners use. BUCY and JOY make some of the underground systems, some of the shovels, barely any of the drills and nearly all the draglines. Joy has extensive repair contracts.

      Second myth - they are competitors. This is almost baloney. JOY makes most of its money from maintenance and repair contracts and spare parts from MinePro - lots of margin - look at their ROA. BUCY makes about 50/50 machine sales to spare parts. BUCY therefore competes more against the smaller machines made by CAT, Komatsu et al. Whereas JOY competes more against the miners maintenance staff. Obviously, they do compete directly against each other where their product lines overlap but its not the Chevy vs Ford rivalry its made out to be.

      The pluses of both - they have a small customer base so its easy to forecast sales trends as an outside investor/trader. Make a list of the major miners like BHP, Vale, etc and follow their earnings reports. When they make money they will spend on new capital equipment - the things BUCY and JOY make. Categorize the customer base by commodity type. Some commodities make more money than others. Figure out which company has which customers. Its better to have a copper miner for a customer than a coal miner. Figure out historic PE ratios and ranges as both stocks are heavily owned by institutions and those analysts seem to focus on that the most.

      Joy pluses - they are doing well with their Lean manufacturing. The payoff is improving margins in the face of lower sales. The flip side of this a negative for BUCY. They can't even spell Lean and the people trying to implement it haven't a clue. Their former lean implementation manager is a nice lady but she has a communications degree and no lean experience. That says a lot about the judgement of the operations side executive management that let that happen.

      Negatives - commodities move in cycles. Both companies have been bust more than once. Right now both have good management.

      Both plus - the customer base is improving their capital planning cycles so the boom bust cycle may ease as the years go by and customers are more savvy.

      BUCY plus - they spent lots lately improving their design team.

      BUCY negative - their competitors can design. The small hydraulic shovels by Komatsu et al are eating into the big shovel market. BUCY needs to counter with their own smaller shovel. This may explain their focus on R&D lately.

      Big pluses for both - the 40 year capital replacement cycle was about ready to peak before the recession. BUCY was trying to figure out how to make 30 shovels a year and had the backlog for it. The recesssion hit and they went to 18 shovels, pushed out the 2009 backlog into 2010 and kept themselves going. The backlog from the replacement cycle is returning. This also relates to a larger installed base which gives you high margin spare parts business down the road.

      Hope this helps. Sorry if it rambled a little.

    • F.Y.I. Charles Payne stock expert with Fox News recently put out a buy rec. on BUCY.

 
JOY
33.23-0.43(-1.28%)Jul 7 4:04 PMEDT