NYU Student Investors Try Joy Global

So far this fall, New York University's undergraduate Investment Analysis Group (IAG) has chosen to pass on quite a few investments. This trend had more seasoned members wondering whether or not underclassmen had the knowledge and experience needed to pull the "buy" trigger on a stock. However, things have changed.

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

Week 7: 'Global' Growth

On Friday, Nov. 2, Joy Global JOYG 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.