Eureka! That's what you're supposed to scream when you unearth a golden nugget. Here in the investment world, a single nugget of truth can be worth its weight in gold.
Joy Global (Nasdaq: JOYG ) has exhibited an uncanny knack for extracting priceless nuggets of truth from the torrential streams of data and analysis that flood the investment landscape.
Investors who joined me in tracking this company's regular assessments of recovery in global commodity demand (since the crisis-induced shock of 2008) have enjoyed a treasure trove of well-vindicated insight into the longer-term bull market trend in mined commodities like metallurgical coal and copper. For Fools who may have smelted Joy Global's nuggets of market insight into timely stock selections like Teck Resources (NYSE: TCK ) or Southern Copper (NYSE: SCCO ) , some impressive year-to-date returns form the reward for calls well made.
Meanwhile, the mining equipment manufacturer has also delivered nuggets of another kind via golden profitability. The company saw net earnings rise 18% for its fiscal fourth quarter and a remarkable 22% increase sequentially from the third quarter. New bookings soared 48% to more than $1 billion, while non-U.S. sales expanded 14.4% to account for more than 60% of total revenue.
As we approach 2011, widespread concerns over China's growth trajectory -- and a sloppy outlook for industrial demand in the old-guard economies of Europe and the U.S. -- may have some Fools wondering whether this prosperous year for copper and coal investors may prove to be something like '90s pop band 4 Non Blondes: a one-hit wonder.
But nothing could be further from the truth. As Joy Global avows:
The commodity end-markets have strong fundamentals and a positive outlook despite slow economic recovery in the industrialized countries and slower growth in the emerging markets, particularly China, which results from efforts to balance economic growth while containing inflation.
More importantly, the sustained strength in demand for copper, coal, and iron ore that we witnessed during 2010 may have been less attributable to China alone than many investors might presume. China's demand for copper, for example, plateaued a bit near 2009 levels, while demand growth from global markets ex-China appears to be the current driving force behind a rapidly tightening global copper supply.
Copper looks like pure gold for 2011 and beyond
Looking over the horizon, we find that the latest five-year development plans from both China and India are calling for massive infrastructure overhauls that will substantially bolster global demand. China's plan includes a major build-out of the electricity grid in the western provinces, and Joy Global expects 1 million tons of fresh annual copper demand from that initiative alone! India is looking to invest some $350 billion in infrastructure spending over the next three years, with a heavy emphasis on increasing power generation capacity. That's clearly bullish for long-term thermal coal demand, but for the construction process, the country will also require major quantities of copper to transmit all that energy.
To put this all into context, consider for a moment that analysts are already forecasting a global supply deficit of more than 350,000 tons of copper for 2011. Add to that decidedly bullish fundamental setup the recent revelation that one single company has cornered at least 90% of the physical stockpile at the world's largest metals exchange (the LME), and I believe you have the makings for a dramatic period of pricing strength in store for copper. Joy Global CEO Mike Sutherlin certainly appears to agree, adding, "copper remains the commodity with the strongest fundamentals."
Copper is in good company
Condensing his company's bullish commodity outlook into a single parting nugget of truth, Sutherlin declares, "Based on both market fundamentals and the discussions directly with our customers, we are confident that this is the early stage of another multi-year expansion of the mining industry." Caterpillar's (NYSE: CAT ) $8.6 billion bet on Bucyrus (Nasdaq: BUCY ) signals that behemoth's agreement with such an outlook, while coal miner Peabody Energy (NYSE: BTU ) has commented that "the global coal industry is in the early stages of a long term supercycle."
I expect commodity prices in general -- and in particular, those for copper and metallurgical coal -- to record further substantial gains in 2011 that will carry the shares of profitable miners along with them. I recently added the Global X Copper Miners ETF (NYSE: COPX ) to my silverminer CAPS portfolio, and I fully expect that pick to help me climb the ranks in the world's greatest stock-picking game. Every investor must pinpoint his or her own truth from the information that's available, but this ongoing commodity bull market is one golden nugget I'll continue to hold onto through 2011 and beyond.