Thursday, March 18, 2010

Diamond Stocks: A Girl's Best Friend?

Diamonds are the hardest substance on earth and come in a variety of colors including blue, yellow, brown, green, purple, pink, orange or red. The major player in the diamond industry is the De Beers company, which was formerly a publicly traded stock but is now privately held.

However, there is an indirect way to invest in De Beers, through Anglo American (AAUKY.PK) which owns 45% of De Beers.De Beers company owns twenty mines in Africa, producing 15 million carats of diamonds every year with in excess of half coming from its Venetia mine. Anglo American has operations in every major continent around the world, with interests in platinum, gold, diamonds, copper, iron ore, coal, and nickel. The company has had a net profit margin of 14% for the last year, with a 20.6% annual operating margin increase.

BHP Billiton Ltd. (BHP) is a a natural resource company that explores for and produces diamonds, titanium, potash, copper, silver, lead, zinc, bauxite, and uranium. A significant source of their revenues comes from petroleum and natural gas. The stock has a forward price to earnings ratio of 14 and pays a 2.1% yield.

Harry Winston Diamond Corporation (HWD) is a Canadian based miner and retailer of diamonds. It owns a 40% interest in the Diavik Diamond Mine in northern Canada, and markets diamonds through retailers under the Harry Winston brand. The stock has a forward PE ratio of 110.

Mountain Province Diamonds Inc. (MDM) explores for and produces diamonds, primarily in northern Canada. The stock has recently generated negative earnings and has a low market cap of about $130 million.

In addition to the miners of diamonds, there are also the retailers. Zale Corporation (ZLC) has over 690 stores in 50 states. The stock has recently generated negative earnings and has a low market cap of about $118 million.

Tiffany & Co. (TIF), founded in 1837, is one of the top jewelry companies in the world, with over 60 U.S. stores and over 100 international locations. The metric carat as a weight standard for gems was developed by a Tiffany gemologist. The New York City flagship store is home to the 128-carat Fancy Yellow Tiffany Diamond. The stock has a forward PE of 20, and a yield of 1.7%.

Blue Nile Inc. (NILE), founded in 1999, is a leading web based retailer of diamonds and fine jewelry, and the largest online retailer of certified diamonds. The stock has a forward PE of 44.

Signet Group plc (SIG), owns 1,400 jewelry stores in the United States, under the trade names of Kay Jewelers and Jared The Galleria Of Jewelry. The company has recently generated negative earnings.

Speaking of jewelry, if you like gold and silver, you might want to check out the list of gold and silver ETFs at

Author does not own any of the above.


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