Signet Jewelers: A Diamond Stock Bucking The Trend

Retail and Consumer Confidence
27/10/2015 09:47

Jim Cramer, from CNBC's "Mad Money", recommends acquiring stock in Signet, the largest specialty jewelry chain in the U.S., Canada and the U.K, which "most people have never heard of." Cramer asks what caused a "little-known stock like Signet Jewelers to have such an impressive run", to the point where it is "crushing its competition." Firstly, "a big part of Signet's success goes back to its smart acquisition of Zales last year for $1.4 billion." They paid a 41% premium, but "it turns out that Signet got an amazing price, and Cramer thinks this is only the beginning of the potential value that Signet could unlock from the deal."

Cramer says "the company has a lot going for it," pointing to Signet's position (14%) in the extremely fragmented $41 billion U.S. jewelry market, where no other specialty jewelry store has more than a 1% market share. It also has an advantage in scale, and inherent protection from web-based competition like Amazon, since most people want to try on jewelry before buying it. "Given the fact that the stock is cheap, at just 18 times next year's earnings estimates, it is clear to Cramer that it is a screaming buy."