Have you considered diamonds as a tech bet on stocks?
I hadn’t until I read a post about Signet Jewelers (symbol SIG) in the jewelry space, that deals heavily in engagement rings.
Now that might seem odd for a blog that focuses on technology stocks to talk about something so physical like jewelry and precious stones. But it’s not, really.
The pandemic crushed SIG’s stock price because it was a physical store retailer. You know, in malls and such. Remember those? But that’s not what makes this interesting or a tech investment. No, it’s this.
Signet’s pivot to e-commerce
They pivoted to an e-commerce store, and they’ve done it pretty well and quickly. And they’ve seen growth.
They also own a lot of brand properties that you would recognize like Kay, Jerad, Zales and James Allen. They’re all national brands that most consumers would know, and that recognition doesn’t just fade away. They have staying power. And, yeah, those brands belong to SIG. And now it’s moving much of its transactions and sales online.
Signet has some interesting tailwinds
And here’s the really interesting part: Online dating is on fire. That is directly related to SIG because they are in the love business. When people are going on their awkward first dates, even over Zoom, and, if something magical happens and they fall in love, that means magic will happen with SIG: They’ll get sales.
They will sell jewelry and engagement rings by the stock-price-moving boatloads.
I think people are dating more in these weird times because social distancing and isolating are causing us to realize that being in a relationship is a good thing. We aren’t designed to be alone. And being in all of that aloneness creates pent up demand for relationships, dating in particular. And the culmination of that is often marriage.
And no matter what you’re opinion of diamonds is, people buy them when they’re in love and getting ready to get engaged. That’s the norm—even the expectation.
That’s where SIG will do well. Inevitably some of those lovers will end up in one of Signet’s online stores and buy a rock to display their undying love in an expensive little (or not so little) stone.
Customer behavior is changing
And buying something worth thousands of dollars online sounds absurd. But it isn’t. The behavioral trend is certainly in its favor. Just the other day, I bought a car, sight unseen. That’s right. I didn’t even test drive the vehicle before I wired over a lot of money to the dealer. Don’t worry; it worked out, and the car’s great. And consumers are doing this more and more. That’s why companies that sell cars exclusively online, like Carvana and Vroom, exist. So if people are willing to buy a car over the internet for thousands of dollars, it’s not a far step to get a diamond online either.
And that’s where brand recognition shines. People will be far more willing to shop from brands they know. Covid is likely making that behavior even stronger since consumers are forgoing in-store buying. For consumers to buy big-ticket items online, it helps to have stronger branding, returns policies, and a greater ability to imbue trust. Signet with their brands does that. That branding is
gold diamonds for a company that has it.
And that can flow down to investors who hold SIG stock.
There are other brands that SIG doesn’t own but are recognizable like Blue Nile. There’s competition. But that doesn’t mean both of them can’t exist in the same universe and still win. They can. They can both make money and still exist fat and happy.
The jewelry business has always been fractured. There are thousands of mom and pop stores. Then you have the larger retailers and the national brands. And many have been doing just fine even with so many other jewelers.
I don’t hold any shares of SIG at the moment, but I am watching it. It’s interesting. It’s been rising since it bottomed around $5 in March, while in the throes of pandemic fears. Before that, in November 2015, the price of the stock maxed out around $150. Yesterday it was hovering around $20, almost quadrupling since March. As long as it survives and truly makes the e-commerce work, there is a lot of upside for this stock.
Of course, there’s risk. All bets are risky one way or another.
The point is to lower the amount of risk as much as possible by finding companies that can grow and dominate their markets and have favorable market conditions. And Signet certainly seems to have all of that going for it.
And, maybe, if you invest well and you’re one of those lovebirds who bought an engagement ring, you might be able to get your money back on your engagement ring by investing in SIG.
Don’t take my word for it though. Do your own research and talk to a professional advisor.