Bucyrus (BUCY): A play on the global demand for commodities

By Timothy Lutts, Chief Investment Strategist and Editor of Cabot Stock of the Month
For Cabot Wealth Advisory, 12/6/07 Sign up for free Cabot Wealth Advisory e-newsletter

Bucyrus (BUCY) was founded way back in 1880 in Bucyrus, Ohio. The name Bucyrus, by the way, was derived from “Beautiful” and “Cyrus the Great,” and the Ohio community was the first of several in the U.S. to use it. Today, Bucyrus, with a population of over 13,000, claims to be the bratwurst capital of the world (though there are rivals) as well as home of the last hand-hammered copper kettle company in America. But the company, which began by making steam shovels, is long gone; it moved to its current headquarters in Milwaukee, Wisconsin in 1893.

Mining equipment is still the company’s focus, and it’s a great business to be in, thanks to the world’s growing demand for coal, copper, iron ore, bauxite and virtually every other mineral found in the ground.

The stock, selected by our OptiMo stock-picking system, earned a spot in Cabot Top Ten Report a few weeks ago, and here’s what editor Michael Cintolo wrote:

“Bucyrus International is a play on the global boom for commodities, as the firm provides excavation equipment such as electric mining shovels and blast-hole drills for both surface and underground mining. But this is no lump-sum business — nearly half of the company’s revenues come from aftermarket parts and services, so a big sale of equipment often leads to years of recurring revenue. A recent acquisition has bolstered results, and, thanks to elevated metals prices and signs that coal prices are on the rebound, analysts are expecting a 50% jump in earnings next year as new orders pick up. (Bucyrus already has $985 million of backlog booked for the next twelve months.) And this follows a few years of healthy earnings growth, a sign that management at least knows how to handle boom times. It’s not changing the world, but the wind remains at Bucyrus’ back.”

Adding to that, I’ll point out that the stock is becoming increasingly popular with institutional investors. A year ago, it was owned by 126 mutual funds; now the number is 154. The stock declined to touch its 50-day moving average several times during the market’s November correction (but didn’t close below it), and now it’s hitting new highs. The 50-day moving average is now up to 80, while the 25-day is nearing 84, and a dip to that level might offer a decent entry point.

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Tim LuttsTimothy Lutts
President, Chief Investment Strategist, Editor of Cabot Stock of the Month

Timothy Lutts heads one of America’s most respected independent investment advisory services, publishing eight newsletters to more than 165,000 subscribers around the world. Tim leads a dedicated team of professionals who serve individual investors with high-quality investment advice based on time-tested Cabot systems. Under his leadership, Cabot has been honored numerous times by both Timer Digest and the Hulbert Financial Digest as among the top investment newsletters in the industry. Tim also edits Cabot Stock of the Month.