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2006-05-25 :: No JOYG in Mudville

Sorry for the bad pun in the title, but many of you know that one of my best performing holdings over the past 3 years has been Joy Global (JOYG).  What better company could you own that one that manufactures heavy machinery for the metals and coal mining industry.  Today, they reported net income that more than doubled from a year previous, they have orders backlogged that they can’t keep up with (i.e., future earnings increases) due to some of their suppliers not being able to keep up with JOYG’s needs and due to mine operators having trouble getting permits to open new mining operations.  None of this sounds bad to me.  What this says is that the metals and coal industries are H-O-T hot and our money is in the correct industry.  This is clearly a buying opportunity for JOYG, and once the share price stablizes I’ll be adding to current positions and establishing positions for clients that don’t yet own any.

With this small exception, today was a decent day for the market.  Yesterday, I wrote that I would feel a lot more comfortable with the potential for a rally if we had an up day that ended on the day’s high.  Today, we had very nearly just that.  The market market moved up and stayed up all day – a good sign.  The VIX-Volatility Index that I’ve written about lately moved down to a less-oversold position today, yet it is now in roughly the same positon as last October’s selloff peak, prior to the major move upward in the markets going into January.  

This rally should have more legs to it.  It won’t be a straight shot back up, but we should see a trend of strength, particularly in the energy stocks.