It's been one year since I added Joy Global (NYS: JOY) to my Real Money Portfolio; one crazy year. And while Joy's stock got off to a hot start, it has cooled off a bit since then and the market has been watching it in its rear-view mirror ever since. But for me the picture is still clear: This one still has diamond potential written all over it.

Keep it simple
In line with my investing philosophy, there are four things I look for when considering any investment:

  1. I want management I can trust. They need to be in it to win it, and they need to be honest.
  2. I want something that is understandable and that I can enjoy following.
  3. I want a catalyst -- a short-term event or long-term trend that will help create value.
  4. I want a fair price. Enough said.

Management I can trust; in it to win it
Mike Sutherlin has held the CEO position since 2006 and has been with the company since 2003. He also holds previous executive experience at National Oilwell Varco (NYS: NOV) along with extensive experience in the commodities industry dating all the way back to 1978.


Sutherlin has done an excellent job navigating the company through the worst recession in our lifetime. Revenue has more than doubled and net income is up 158% and the balance sheet remains in excellent shape with $450 million in cash versus $1.6 billion in debt which is more than easily serviced by operating earnings almost 20 times over. It's also worth noting that while share count is actually down during his time at the helm, Joy has refrained from any share buybacks since 2010 in order to focus on keeping the company in good fiscal shape. I like that call, especially as it continues to increase dividends paid out to shareholders.

Understandable and interested
Joy's not too difficult to grasp; it makes and sells underground and surface mining equipment. Today the company operates in two segments: P&H Mining Equipment (surface mining equipment) and Joy Mining Machinery (underground mining machinery).

Specifically P&H is the world's largest producer of electric mining shovels, and Joy Mining is the world's largest producer of underground mining machinery for the extraction of coal and other materials. While the company's products are used for mining a number of materials, more than two-thirds of revenues come from their coal mining customers.

A long-term trend
Much of the case I made a year ago is still the case today. True, in the near term miners are cutting back on capital expenditures a bit as commodity prices remain low. Another major player in the space, Caterpillar (NYS: CAT) also recently cut forecasts based on slowing growth as coal prices have fallen 20% this year.

Coal consumption here in the U.S. and in Europe has been on the decline thanks to record low natural gas prices. But the long-term picture for India, China, and other non-OECD nations is still very positive. Sure there will be hiccups along the way, but these countries will continue with their industrialization and U.S. coal producers are investing today to double their capacities to export coal into seaborne markets.

Yes, China is admittedly a bit of a wildcard today. But the fact remains that China's coal market is responsible for more than half the world's total coal production; yet the country remains a net importer of coal. This certainly reinforces the importance of Joy's acquisition of International Mining Machinery and offers insight into why almost 25% of Joy's workforce is now in China. As COO Ted Doheny put it, "If you are in mining, you better be in China."

All at a fair price
I'm not going to sit here and scream that Joy's stock is dirt cheap. It's an overused expression and almost always the first sign that something is cheap for a reason. However I will say that I believe today's price is not reflective of what the company will witness in higher times, and I do believe there will be higher times. Joy Global is the consummate cyclical stock and pessimism is high right now. This excerpt from management's most recent earnings release doesn't exactly leave a warm and fuzzy feeling:

The demand for commodities has slowed, adjusting to weaker global economic growth. Recent economic data is mixed, but is generally consistent with low U.S. growth, Europe contracting and China decelerating. With demand slowing, recent capacity additions have created supply surpluses and depressed pricing for most commodities. Customers are responding by cutting capital expenditures, reducing overhead and trimming production. Production cuts have been greatest in U.S. coal, but the closure or reduction of higher cost coal mines is also in process in Australia and Russia.

Maybe I'm a glutton for punishment. Maybe I'm wrong. But the stock trades for eight times full-year estimates of about $7.15 per share which is just flat out low considering the fact that the company has a tremendous installed base of equipment and earns 60% of its revenue from its higher margin aftermarket business. Management's strategy is to lead with service and win with service. It's the "core DNA of the company" and why I believe Joy will continue to win business as it spreads its reach.

Another Joyous occasion
It's tough to buy stocks when the mood is dour. However, with a company like Joy Global when the mood turns the stock will have already taken off. So I'm jumping in (again) now and buying another $1,000 worth of shares for my Real Money Portfolio. Make sure to follow along with me on Twitter to keep up with all the happenings in my Motley Portfolio.

The article It's Time To Double Down for Joy originally appeared on Fool.com.

Jason Moser has no positions in the stocks mentioned above. The Motley Fool owns shares of National Oilwell Varco and Joy Global. Motley Fool newsletter services recommend National Oilwell Varco. 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.

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