8 stocks for the market's next rally (2) By Jim Jubak

Jim Jubak 9/9/2010 5:00 PM ET

8 stocks for the market's next rally (2)

By Jim Jubak

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http://articles.moneycentral.msn.com/Investing/JubaksJournal/a-peek-at-the-next-market-winners.aspx?page=2

Cyclical strength

What were some of the best-performing U.S. cyclical stocks Sept. 1? Let me give you a short list:

• Cummins (CMI, news, msgs), a maker of truck engines, up 7.4%.

  Click graphics to see interactive charts

  Cummins

  

  Massey Energy

  

  Joy Global

  

  Rio Tinto

  

• Titan International (TWI, news, msgs), a maker of tires for construction, mining and agriculture, up 7%.

• Massey Energy (MEE, news, msgs) and Walter Energy (WLT, news, msgs), two coal companies, up 7% and 7.1%, respectively.

• Bucyrus International (BUCY, news, msgs) and Joy Global (JOYG, news, msgs), makers of mining machinery, up 7.9% and 6.1%, respectively.

• Rio Tinto (RTP, news, msgs), a diversified mining company, up 7.3%.

• And DryShips (DRYS, news, msgs), an ocean carrier of bulk cargoes, up 7.7%.

I think you get the idea. Why these companies?

Because, by and large, they fit into a category that I've flagged for you more than once in the past few months (most recently in my blog post "If the economy is so terrible, why are machinery stocks relatively strong?").

This group is defined by this rule of thumb: The longer the lead time of your customers and their business -- the longer, for example, it takes them to increase production -- the more likely those customers are to start buying now.

For example, in its recent earnings report for the quarter that ended in July, Joy Global said it was seeing stronger-than-projected orders from its customers in the mining industry. Instead of orders growing by 25% in 2010, the company was projecting 30% growth. And 10% growth for 2011.

 

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