Manufacturer and servicer of high productivity mining equipment for the extraction of coal and other minerals and ores. The Company's equipment is used in major mining regions throughout the world to mine coal, copper, iron ore, oil sands & other minerals
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My 3 year outlook
Bear case estimate = 8% eps growth per year , P/E remains around 8, 2015 price $68, 3 yr comounded annual return 6%
More realistic estimate = 12% eps growth per yr, P/E expands to 12, 2015 price $114, 3 yr compounded annual return 25%
My thesis is that the global pessimism (espcially related to Chinese growth) has pushed this very highly profitable, robustly growing company well below it's intrinsic value. I will also admit that this type of business is probably outside my circle of competence, but it's CAPs, not real life, and i'll take a chance. Looks good for the long term.
"Time is the friend of the wonderful company" - Warren E. Buffett
My original growth estimates were highly speculative. I'm just not smart enough to predict this company. Despite great numbers over the past decade, the numbers over the past 2-3 years were actually too good. Normalizing the numbers and knowing how cyclical they can be shows that this may not be the epic bargain I orginally thought. Then again, it *could* be. But my level of confidence is low and my margin of safety is non-existent.
I can't predict commodities, coal, china, or JOY's competitive advantge. I know nothing about mining.
What I do know is this is my "best" pick so far, and it's also the one I understand least.
Since I'm not a big fan of pain, I will take the CAPs money and run.