Buffett's Diamonds Lose Their Sparkle

• By the tickerspy.com Staff
• On 11:47 am EDT, Friday September 25, 2009

Warren Buffett has made billions picking "diamonds in the rough," but he sees a bleak outlook for the ones in display cases.

Back in May, at Berkshire Hathaway's (NYSE: BRK-A - News, BRK-B - News) annual shareholder meeting, news cameras followed some of Buffett's "partners" as they shopped at high-end jewelry store Borsheim's. Berkshire has held a majority position in the jeweler for the last 20 years, and a reception during the shareholder weekend has become a tradition. Unfortunately, the free press hasn't changed Buffett's outlook on the sector, which he is also exposed to via an investments in 19-store chain Helzberg Diamonds and 75-store chain Ben Bridge Jeweler, according to Bloomberg.

According to Bloomberg's September 15 report, Buffett told Bridge employees that he doesn't expect a quick recovery, advising executives, "We are deeply in this - in a recession - and it's going to take a long time to get out of it." Buffett's jewelers are privately held, and thus don't appear in Berkshire's U.S.-listed holdings at the end of Q2, but some of the sector's other stocks have shown strength recently.

As a whole, the Jewelry Retailer Stocks Index's performance has contradicted Buffett's outlook for the sector. All but one of the Index's nine components are more than 100% above their 52-week lows, and two thirds of the sector has more than tripled after getting beaten down during the recession.

This week, however, some investors are taking money off the table, sending jewelers down by as much as -11%.

Tiffany (NYSE: TIF - News) has survived through its share of economic downturns, including the Great Depression. Investors who bought the stock on one of three dips below the $20 mark are now up by as much as 114%. Tiffany is just -9% from its 52-week high.

Harry Winston Diamond (NYSE: HWD - News) gave back more than -10% of its 50% one-month rally this week. Blue Nile (NASDAQ: NILE - News) and Zales (NYSE: ZLC - News) are both off by more than -3% for the period.

Movado (NYSE: MOV - News) is the sector's lone winner in the last five sessions, and China-based Fuqi International (NASDAQ: FUQI - News) is slipping only fractionally.

As the holiday shopping season approaches, investors should keep a close eye on trends in the Jewelry Retailer Stocks Index, as a weak performance could weigh on share values. Saks (NYSE: SKS - News) and Nordstrom (NYSE: JWN - News) are other high-end retailers are also in focus.

Fun and informative, tickerspy.com is a free investing website where you can track multiple stock portfolios and compare against 250 proprietary Indexes tracking themes from nanotech to agriculture to precious metals. Best of all, tickerspy.com lets you spy on the portfolios of nearly 3,000 Wall Street institutions and hedge funds and see graphs of their performance. Try tickerspy.com today and find out how you stack up against investing legends like Warren Buffett!

Buzz up!