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NYU Student Investors Try Joy Global

Jonas Elmerraji

Here's a breakdown of the IAG's November pitches and picks.

Week 7: 'Global' Growth

On Friday, Nov. 2, Joy Global (JOYG - Cramer's Take - Stockpickr) was presented as a buy to the IAG by juniors Connie Chan and Jonathan So, along with freshman Joanna Lau. The Milwaukee-based company builds and services mining equipment that's used to extract coal and other minerals from the earth. Chan, So and Lau say that the U.S. uses coal for more than half of its energy production, so it stands to reason that getting that coal out of the ground is big business.

But according to Chan, the big outlook for Joy Global is found abroad in a vibrant emerging market like China.

Chan says: "Urban population surges in China have created an increase in demand for electricity. Due to [China's]still-developing infrastructure and the lower costs of coal relative to other energy sources, [the Chinese] are primarily looking to coal to meet their demand. They are a net importer of coal by 20 to 30 billion tons. Thus, they are currently in the process of upgrading and developing their mines to increase internal sources of coal. This is where Joy Global comes in. [The company is] currently in the process of expanding into the Chinese market through a segmentation strategy and [so far,] only have four locations relative to China's numerous coal mines, so there are huge growth potentials [for Joy Global] in China."

Buying and maintaining mining machinery from Joy Global isn't cheap -- and luckily for its investors, the company also generates a good bit of revenues from servicing and maintaining their products.

Chan explains: "[Joy Global's] after-market service ensures future cash flows far beyond the initial sale [of the equipment]. Joy Global resembles a high-tech firm in the sense that customers are locked into [the company's own] service/repair of their equipment, because there is no company out there with comparable knowledge and skills to do so."

The other IAG members agreed with this thesis and voted Joy Global into the portfolio with an almost unanimous vote.

Week 8: Flight to Quality

On Friday, Nov. 9, junior John Wood and freshmen John Leung, Ravi Shah and Bryant Wang presented Lockheed Martin (LMT - Cramer's Take - Stockpickr) to the group. Lockheed is one of the biggest defense contractors out there, but is it a good investment?

Wood thinks so.

According to Woods, "The choice to pick Lockheed Martin was primarily based on an idea that the economy will not experience great health in the foreseeable future."

Woods explains: "When we were looking for a good stock to pitch, we wanted to find a company that was not pegged to the health of the U.S. economy or to the U.S. dollar, that had financial stability and had high volume . We wanted a stock that investors 'flying to quality' and liquidity might favor."

According to Wood and his crew, defense spending doesn't generally follow the ebb and flow of the U.S. economy but has historically followed a "model" the group believes it can use to predict how much the government will be paying out to contractors like Lockheed in the future. And because Lockheed earns more than 80% of its revenue from the U.S. government, the company was presented as a stable investment.

But why Lockheed and not one of the other defense contractors? Wood, Leung, Shah and Wang see Lockheed as a standout among its peers, which include Boeing (BA - Cramer's Take - Stockpickr), Northrop Grumman (NOC - Cramer's Take - Stockpickr), Raytheon, and General Dynamics (GD - Cramer's Take - Stockpickr). The company is currently the U.S. government's No. 1 defense contractor, and according to Wood, it is working to keep its place.

Wood explains: "Lockheed is the shining star because its R&D [research and development] spending has outstripped its competitors. ... When Lockheed became the prime contractor for both of the DoD's [Department of Defense] combat aircrafts, it was no fluke or the result of luck, but rather the result of superior technology obtained by greater and sustained R&D spending."

Lockheed was voted into the IAG portfolio with a vote of 31-25.

Week 9: Important Products and Cyclical Protection

The most recent stock to be voted in by the IAG is Hologic (HOLX - Cramer's Take - Stockpickr). Senior Alina Costica and sophomores Neha Gaddam and Jessie Yoh heard the company mentioned in one of Jim Cramer's recent "Mad Money Lightning Rounds," decided to give it a closer look, found it investment-worthy and on Friday, Nov. 16, made their pitch.

Hologic is a company that makes diagnostic and medical imaging systems for women. The company's products are designed to help detect breast cancer and osteoporosis. Hologic appealed to Costica, Gaddam and Yoh because they "were really interested in finding a stock that would be somewhat shielded from a potential recession " and was also an investment that would get them "excited about [the company's] product offerings."

"Hologic seems to fit the bill in terms of being shielded from a potential recession, as well as being in an industry that interested us," says Costica. "It is a leading women's health care company that is helping save women every day by detecting breast cancer and osteoporosis."

Last month, Hologic completed a merger with Cytyc, another manufacturer of health care devices for women. With Hologic tops in its field, the team is confident in its investment potential.

According to Costica, Hologic now has "over 50% market share across almost all of their product segments." Costica adds, "One of the main catalysts for the company is the recent conversion from film-based mammography to digital mammography systems. Also, the recent merger transforms [Hologic] into a fully integrated women's health care company, with access to the OB/GYN market."

With the end of the fall semester and the winter holiday break now in sight, how will these three recent buys affect the IAG's model portfolio? Time will tell.

The IAG's Top Five

Until we catch up with the IAG again, here are the group's current top five best-performing stock holdings:

• Suntech Power Holdings (STP - Cramer's Take - Stockpickr)
• Perfect World (PWRD - Cramer's Take - Stockpickr)
• Activision (ATVI - Cramer's Take - Stockpickr)
• Apple (AAPL - Cramer's Take - Stockpickr)
• Xerium (XRM - Cramer's Take - Stockpickr)