It’s Time To Buy This Unloved Mining Stock Again

But what if the market for JOY’s mining equipment doesn’t hit bottom in coming quarters, as the replacement cycle would suggest? Well, this stock already holds solid value in the context of depressed current sales trends. Thanks to massive cost cuts, analysts at Goldman Sachs think the company will generate at least $4 a share in free cash flow (FCF) in fiscal 2013, and more than $5 a share in FCF in fiscal 2014.

To seize on the FCF/valuation disconnect, the company is now in the midst of a $1 billion share buyback that could reduce the current share count by 15% to 20% if completed at prices around $50.

To be sure, Goldman’s analysts aren’t yet penciling in a big demand snapback in fiscal 2015. Then again, in the depth of the financial crisis in 2008 and 2009, few analysts were willing to pencil in a more robust mining spending environment a few years down the road.

Here’s a chance to think like a fund manager and not a Wall Street analyst. Joy Global is a must-sell stock when business conditions are great and shares reflect a robust outlook. That’s when Wall Street analysts are at their most enthusiastic.

In contrast, fund managers, many of whom aren’t really concerned about how the next few quarters will play out, look for great companies stuck at the wrong end of the economic cycle. That’s the reason to be thinking about a company like Joy Global right now.

Action to Take –>

— Buy JOY up to $58

— Set stop-loss at $48

— Set initial price target at $70 for a potential 21% gain in eight months

This article originally appeared at ProfitableTrading.com
This Stock May Look Like a Screaming ‘Sell,’ but I Say It’s a ‘Buy’

P.S. I’m not a market technician, but I’ve seen enough charts in my day to know when a pattern is shaping up to be … interesting. I encourage you to check out my colleague Amber Hestla’s presentation to learn more about what the dreaded “triple top” could mean for your portfolio in the coming weeks.