Forget Joy Global (JOY), Take Caterpillar (CAT) Instead - Cramer
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Joy Global (NYSE: JOY) and Caterpillar (NYSE: CAT) are two titans of the heavy machinery industry, driving global growth and infrastructure expansion. But investors would be foolish to invest in both, limiting diversification in their portfolios. So which one should an investor choose?
Late Monday, stock sage Jim Cramer posed the same question. Saying that he wouldn't be a buyer of either right now, there is a clear winner amongst the two.
From a pure metrics standpoint, Joy Global has a heavier price-to-earnings ratio of 11.5 times and a PEG ratio of 0.66, a better investment when compared with Caterpillar's P/E of 10 times and PEG ratio of 0.88.
Diversification is also key, Cramer stated, and with Joy Global being highly levered to mining equipment -- drawing about 66 percent of sales from coal mining equipment alone, he pointed out -- there's a lack of options there. Further, he points out that the drop in nat gas prices is making that commodity a more competitive alternative to coal in generating energy. Comparably, Caterpillar is split among sectors like infrastructure, mining, and agriculture.
Looking at China, initial reactions would be that Joy Global has a sweet-spot there, with the country using three-times as much coal as the U.S. per annum. However, Cramer points out that the rising Chinese economy would also be a boon for Caterpillar, as more infrastructure improvements would need to be made in order to accommodate expansion.
On Europe, Cramer noted that many nations are phasing-out coal-fired power in favor of more eco-friendly alternatives, which could put a dent in Joy Global. Conversely, Caterpillar has stated that it expects 2012 numbers in Europe to come in at least flat.
Finally, the icing on the cake is Caterpillar's acquisition of Bucyrus, which makes it a clear winner in Cramer's eyes.
Shares of Caterpillar are down 0.3 percent, while Joy Global is off 2.4 percent Tuesday.
Late Monday, stock sage Jim Cramer posed the same question. Saying that he wouldn't be a buyer of either right now, there is a clear winner amongst the two.
From a pure metrics standpoint, Joy Global has a heavier price-to-earnings ratio of 11.5 times and a PEG ratio of 0.66, a better investment when compared with Caterpillar's P/E of 10 times and PEG ratio of 0.88.
Diversification is also key, Cramer stated, and with Joy Global being highly levered to mining equipment -- drawing about 66 percent of sales from coal mining equipment alone, he pointed out -- there's a lack of options there. Further, he points out that the drop in nat gas prices is making that commodity a more competitive alternative to coal in generating energy. Comparably, Caterpillar is split among sectors like infrastructure, mining, and agriculture.
Looking at China, initial reactions would be that Joy Global has a sweet-spot there, with the country using three-times as much coal as the U.S. per annum. However, Cramer points out that the rising Chinese economy would also be a boon for Caterpillar, as more infrastructure improvements would need to be made in order to accommodate expansion.
On Europe, Cramer noted that many nations are phasing-out coal-fired power in favor of more eco-friendly alternatives, which could put a dent in Joy Global. Conversely, Caterpillar has stated that it expects 2012 numbers in Europe to come in at least flat.
Finally, the icing on the cake is Caterpillar's acquisition of Bucyrus, which makes it a clear winner in Cramer's eyes.
Shares of Caterpillar are down 0.3 percent, while Joy Global is off 2.4 percent Tuesday.
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