Mining equipment supplier JOY ( Joy Global , formerly JOYG) is overbought and stalling while mining conglomerate ABX (formerly American Barrick) is oversold and basing out.
Upside potential: 10% in a month
Downside risk: 5% in a week
NOTE: I like ABX on its own as a long idea.
Joy Global (JOY) is a manufacturer and servicer of high productivity mining equipment for the extraction of coal and other minerals and ores. One particularly relevant fact about Joy Global is that the company reports a goodwill number of $1.38 billion as of October 26th, 2012 and I believe it may be facing a write-down of well over $1 billion if Caterpillar's Friday announcement were to be used as a barometer. Joy Global spent roughly $1.4 billion in 2011 and 2012 to acquire International Mining Machinery (IMM), a Hong Kong listed company, through its wholly owned subsidiary Joy Global Asia. It is worth noting that Caterpillar completed its acquisition of ERA Mining Machinery around the same time frame as Joy Global's International Mining Machinery acquisition. In this article, I will discuss the background of the story, Caterpillar's recent write-down announcement, the connections of the insiders and the likely implication for Joy Global.
When you say 5% decline possible, you mean that there is the possibilty JOY goes up 5% next week and ABX goes down 5%.