Carl Delfeld, editor of Capital Gains, looks around the Pacific Rim for value-oriented investment opportunities. Here, he looks at a mining machinery outfit and a financial play on the expansion of the Panama Canal.
Steve Halpern: We're here today with global investing expert, Carl Delfeld, founder of the Pacific Economic Club and editor of Capital Gains, a newsletter focused on global opportunities. How are you doing today, Carl?
Carl Delfeld: Hello Steven, great to be with you.
Steve Halpern: First, could you tell us a little about the Capital Gains newsletter?
Carl Delfeld: Sure, the Capital Gains newsletter is the member investment newsletter for the Pacific Economic Club, which is a group of over 3,000 different investment professionals, spread out all over the world.
A lot of them are in the Pacific Rim, and the goal, of course, is capital gains, so we're looking at the very best ideas at the extremes, either deep value, demonstrating a clear uptrend, or really fast growth, so we're trying to stay out of, what we call, the mushy middle.
Steve Halpern: Can you tell us a little more about the Pacific Economic Club itself?
Carl Delfeld: Sure, sure. Well, Pacific Economic Club grew over the years. I've been in the business all over the world, you know, from London to Tokyo to Southeast Asia and Manila, and over the years, I've collected, you know, a fair amount of good contacts, and so we started to just, kind of, share ideas and information, and that grew into the club.
In addition to the newsletter and investment ideas, we take tours, investment tours to different places. I have one planned for March, for Vietnam in March of next year, and we also have summits and meetings as well, but the newsletter—the Capital Gains newsletter's, sort of, the heart of the club.
Steve Halpern: Well, let's walk through a couple of stock ideas, so the people can understand what it is you recommend, and one of those ideas is Joy Global (JOY), a large-cap company in the mining machinery sector, and you note that the stock has been hurt by overall weakness in the sector, yet you consider the shares to be cheap. Could you expand on that view?
Carl Delfeld: Sure, sure. Joy Global is a company that, sort of, came out of the ashes of the old Allis Chalmers Company in Milwaukee, Wisconsin, which was a powerhouse in its day.
Joy Global is primarily in the mining machinery business, which, you know, is kind of, pretty much, at the bottom of its cycle, which got our attention. The stock is down 40% over the last two years. It's down 18% this year. You know, while the S&P is up 30% or so, so it's definitely trailing.
The valuation is quite attractive. It's trading right at eight times earnings, forward earnings. That's about half what Caterpillar (CAT) is trading at—and, you know, the earnings have not been that great.
But we really see the cycle beginning to turn, and the other thing I like about JOY is that they don't just make money from selling new mining machinery.
A lot of their business is reoccurring revenue from after-market services, maintenance, and so on, so that cushions the blow. Even in 2008 and 2009, they made money, which is pretty impressive. CAT, you know, lost quite a bit of money that year.Page 1 | Page 2 | Next Page The expert featured in this column, Carlton Delfeld, may or may not own positions in any investment vehicle mentioned here. The views and opinions expressed are his or her own.