Although big mining firms prefer to negotiate with a handful of smaller suppliers, the market is tight enough to accommodate more than one competitor. And the miners won’t allow Bucyrus-Caterpillar to enjoy a monopoly; the industry needs a thriving major competitor.

Joy Global (NSDQ: JOYG) has invested directly in Chinese manufacturers and is enhancing its already significant presence in the country. Although Joy and Bucyrus are global market leaders, a number of smaller Chinese and Russian players manufacture lower-end equipment for surface and underground mining. Joy may seek to expand by acquiring or forming joint ventures with these firms. With surging demand for domestic thermal and met coal, China is expected to be one of the fastest-growing markets for coal mining equipment. Such a deal would make Joy a leading player in this key emerging market.

Alternatively, Komatsu (Japan: 6301, OTC: KMTUY) and Hitachi (Japan: 6501, NYSE: HIT) both compete with Caterpillar in multiple business lines, and the former has long been considered Caterpillar’s arch rival. With a market capitalization of less than $8 billion, Joy Global is much smaller than both Hitachi and Komatsu and would be a potential target if either firm is looking to boost their mining exposure.

Joy might form a strategic joint venture with one of these manufacturers or a European firm such as privately held Liebherr of Switzerland or Volvo (Sweden: VOLV B, OTC: VOLVY), two names firms with exposure to mining-related machinery.

Regardless of whether Joy goes it alone, forms joint ventures or is acquired by a larger rival, I see significant upside for the stock. Buy Joy Global, the latest addition to the Gushers Portfolio, under 85. 

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