Cramer on BloggingStocks: Bucyrus is a buy on China's resurgence
TheStreet.com's Jim Cramer says the near term is muddy, but this mining-equipment maker is a long-term win.
Bucyrus International (NASDAQ: BUCY) (Cramer's Take) really captures this moment. When I was speaking last night to its terrific CEO, Tim Sullivan, I was conscious that his company's stock is at the fulcrum of everything that is going wrong and everything that is going right in this market.
Bucyrus, if you recall, makes mining equipment. It's really the only game in town other than Joy Global (NASDAQ: JOYG) (Cramer's Take), as the mining machinery business was annihilated by years of underinvestment.
The company became the quintessential play on mining as orders, particularly from China, for new coal mining equipment soared each year. China's opening a new coal-fired energy plant every week, so you know that there's demand.
The hedge funds glommed on to this one big-time. Like in so many that we are familiar with -- MasterCard (NYSE: MA) (Cramer's Take), Trinity (NYSE: TRN) (Cramer's Take), Foster Wheeler (NASDAQ: FWLT) (Cramer's Take), NYSE Euronext (NYSE: NYX) (Cramer's Take) and Freeport-McMoRan (NYSE: FCX) (Cramer's Take) -- they took concentrated positions in this and Joy Global and intended to ride the commodity boom for years.
Well, they rode it all right, right from its six-year boom into its incredible bust, and they sold all the way down from the $79 to the low teens, where it stopped going down, mostly because the hedge funds that owned it either sold it all and closed or simply told their investors to take a hike, and that they could not have their money back. (This last is an epidemic that is spreading like wildfire, and it is contributing to the bottoming we are seeing. They are at last out of the way.)
But, in some cases, the orders are going away too. Bucyrus has a confirmed non-cancelable order book of more than $2.5 billion, which makes this well-funded, $1.3 billion market-cap company pretty darned cheap. Yet we are now reading about big cancellations of mining orders. Last week it was Freeport's cancellation -- no impact on Bucyrus. Today Rio Tinto (NYSE: RTP) (Cramer's Take) is in the news eliminating $5 billion in spending.
There are also multiple stories about how hard it will be to get letters of credit in the new year. And we know that any mining company start-up is not going to be funded these days, so no new orders coming there. And in an important conference with Al Gore yesterday, Obama made it clear that he takes global warming seriously, that it will be our policy to fight it, and that means new coal plants in this country are going to be few and far between. (Good for natural gas, by the way, where the hedge funds also seem to have completed their selling.)
So, Bucyrus has been brought low by redemptions, but the news flow going forward could be worse than expected. One possible mitigation: Bucyrus has been hurt by rising steel costs, its principal expense. While this current quarter won't be helped, if you look out a year, if the orders are still there for equipment, the cost of the equipment is going to be much lower, which is why there's some light here beyond the near-term worries -- not woes, worries.
So, what do you do? I think you buy it, for a reason that has nothing to do with any of the current news. I have been watching Asia like a hawk, and the market is telling you that China is coming back and coming back hard. Besides buying the China Fund (NYSE: CHN) (Cramer's Take), which is the direct play on China, people are buying Hong Kong and Japan. If you think that China's coming back, you should think they have to build more infrastructure, which means more power plants, which means more coal.
There aren't many value buyers left in this country. But if there were, they would be buying BUCY right here and buying back down to where hedge funds took it just three weeks ago.
Random musings: You want more outrage, consider that we are bailing out Daimler (NYSE: DAI) (Cramer's Take), a rich German company that owns 20% of Chrysler!
Jim Cramer is co-founder and chairman of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer was long Trinity, Foster Wheeler and Freeport-McMoRan.
Source: http://www.bloggingstocks.com
Bucyrus International (NASDAQ: BUCY) (Cramer's Take) really captures this moment. When I was speaking last night to its terrific CEO, Tim Sullivan, I was conscious that his company's stock is at the fulcrum of everything that is going wrong and everything that is going right in this market.
Bucyrus, if you recall, makes mining equipment. It's really the only game in town other than Joy Global (NASDAQ: JOYG) (Cramer's Take), as the mining machinery business was annihilated by years of underinvestment.
The company became the quintessential play on mining as orders, particularly from China, for new coal mining equipment soared each year. China's opening a new coal-fired energy plant every week, so you know that there's demand.
The hedge funds glommed on to this one big-time. Like in so many that we are familiar with -- MasterCard (NYSE: MA) (Cramer's Take), Trinity (NYSE: TRN) (Cramer's Take), Foster Wheeler (NASDAQ: FWLT) (Cramer's Take), NYSE Euronext (NYSE: NYX) (Cramer's Take) and Freeport-McMoRan (NYSE: FCX) (Cramer's Take) -- they took concentrated positions in this and Joy Global and intended to ride the commodity boom for years.
Well, they rode it all right, right from its six-year boom into its incredible bust, and they sold all the way down from the $79 to the low teens, where it stopped going down, mostly because the hedge funds that owned it either sold it all and closed or simply told their investors to take a hike, and that they could not have their money back. (This last is an epidemic that is spreading like wildfire, and it is contributing to the bottoming we are seeing. They are at last out of the way.)
But, in some cases, the orders are going away too. Bucyrus has a confirmed non-cancelable order book of more than $2.5 billion, which makes this well-funded, $1.3 billion market-cap company pretty darned cheap. Yet we are now reading about big cancellations of mining orders. Last week it was Freeport's cancellation -- no impact on Bucyrus. Today Rio Tinto (NYSE: RTP) (Cramer's Take) is in the news eliminating $5 billion in spending.
There are also multiple stories about how hard it will be to get letters of credit in the new year. And we know that any mining company start-up is not going to be funded these days, so no new orders coming there. And in an important conference with Al Gore yesterday, Obama made it clear that he takes global warming seriously, that it will be our policy to fight it, and that means new coal plants in this country are going to be few and far between. (Good for natural gas, by the way, where the hedge funds also seem to have completed their selling.)
So, Bucyrus has been brought low by redemptions, but the news flow going forward could be worse than expected. One possible mitigation: Bucyrus has been hurt by rising steel costs, its principal expense. While this current quarter won't be helped, if you look out a year, if the orders are still there for equipment, the cost of the equipment is going to be much lower, which is why there's some light here beyond the near-term worries -- not woes, worries.
So, what do you do? I think you buy it, for a reason that has nothing to do with any of the current news. I have been watching Asia like a hawk, and the market is telling you that China is coming back and coming back hard. Besides buying the China Fund (NYSE: CHN) (Cramer's Take), which is the direct play on China, people are buying Hong Kong and Japan. If you think that China's coming back, you should think they have to build more infrastructure, which means more power plants, which means more coal.
There aren't many value buyers left in this country. But if there were, they would be buying BUCY right here and buying back down to where hedge funds took it just three weeks ago.
Random musings: You want more outrage, consider that we are bailing out Daimler (NYSE: DAI) (Cramer's Take), a rich German company that owns 20% of Chrysler!
Jim Cramer is co-founder and chairman of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer was long Trinity, Foster Wheeler and Freeport-McMoRan.
Source: http://www.bloggingstocks.com
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