'm wondering if anyone is familiar with a company called Lazare Kaplan (LKI). The 10Q indicates that the company sells diamonds and has about $11 per share book value, consisting mostly of diamonds carried at cost. The balance sheet looks real good. They seem to have recently reached some very favorable deals and will maybe earn $2 per share next year. The stock is at a low of around $7-8.
I did look at LKI about a year ago, after they have been suggested by some analyst on CNN. I am glad that I did not, considering their stock's performance. Cannot recall exactly why I decided not to go with them except for one general comment - in my perception the days of making lots of money on commodities are over. Both gold and diamonds have very little intrinsic value and even their perceived value have suffered over the last decade. With silver you have a demand factor now outstripping supply (remember, that is why Buffet put a ton of money in that a while ago), but as far as gold or diamonds are concerned, just the opposite is true.
The book value of the company that you are talking about is mostly based on the average cost of the diamonds in stock - but that is only meaningful in the context of De Beers controlling the world supply of diamonds. For their own interest, other diamond sources are pretty much willing to play within the framework of the De Beers cartel, as this keeps the price of diamonds artificially high.
I cannot see how this will continue much longer. The real value today lies in the deployment of knowledge, not in something as tangible as some alloy or metal, or even corn or coffee. About 6 months ago I gambled and switched all my investments to High Tech stocks, mainly successful Internet companies. I am sure happy that I did, considering that my Internet holdings have fared much, much better during the market rout that we are experiencing.