What: Shares of equipment maker Joy Global (NYSE:JOY) jumped 33% in April as investors speculated that demand will pick up later this year.
So what: Demand for mining and drilling equipment has been slugging lately as materials and energy prices have slumped. But an increase in coal and copper prices helped give investors some confidence that demand will eventually emerge.
Highlighting the move higher was Goldman Sachs upgrading the stock because they see a recovery in China happening more quickly than expected. As China's construction industry has improved, the price of iron ore has risen and that could help drive demand.
Now what: At this point, the recovery in demand is purely speculative and investors should act accordingly. If commodity prices fall or the Chinese recovery falters, we could see demand and shares fall again, so there's a lot of risk for investors here. I hope the recovery narrative is true, but I'd like to see more evidence of growing demand and profits before jumping into the equipment business, especially after last month's pop.
Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.