For many individuals, diamonds represent luxury. They're also one of the toughest Materials on the planet. But, if "diamonds are everlasting," what about diamond stocks or firms that deal with everything from gem mining to selling them? With the worldwide diamond jewelry industry worth about $100 billion each year, equities related to creating these high-end items are worth looking into.
Diamonds have a lengthy history, and the diamond business is well-established. High-growth investors should generally avoid this part of the mining industry in favor of other equities. Several diamond manufacturers trade on the penny stock market, such as Gem Diamonds Limited (OTC: GMDMF) and Petra Diamonds (LON: PDL). Stocks that look to be on the cheap should be avoided.
However, a few names stand out for investors searching for large, well-established firms with gradual but consistent development and are worth investigating further.
LVMH Louis Vuitton Moet Hennessy
LVMH Moet Hennessy Louis Vuitton is the world's biggest luxury company and the owner of some of the most recognizable brands in the industry. It's also heavily engaged in diamond and jewelry manufacturing and sales. Bulgari, Chaumet, and TAG Heuer are among the renowned brands in the company's portfolio.
LVMH finalized the purchase of Tiffany in early 2021 to boost its footprint in high-end jewelry and gemstones. Shortly after, LVMH announced the establishment of a collaborative gemstone and raw materials sustainability project to aid in the industry's transformation.
LVMH isn't just a diamond play. LVMH stock offers investors exposure to high-end clothes and accessories, fragrances and cosmetics, champagne, wine, and spirits, in addition to its jewelry brands. If you're looking for a "house of fashion" stock that incorporates some of the world's finest diamond firms, LVMH Moet Hennessy Louis Vuitton is a good place to start.
Rio Tinto, situated in the United Kingdom, is one of the world's leading raw material producers. Iron ore, aluminum, and copper are among the goods extracted by the mining behemoth. Rio Tinto's global operations include a few high-yielding diamond mines, making it one of its major diamond producers.
Industrial metals are Rio Tinto's main source of revenue, and their use in manufacturing, technology, and other sectors is expanding. However, like with many raw material and mining industries, the demand for Rio Tinto's goods is cyclical. Nonetheless, Rio Tinto is one of the world's largest and most dependable metals producers, giving it an excellent choice for investors seeking some diamond-related exposure.
UK-based Anglo American Another top mining stock, Anglo American, has worldwide operations producing platinum, copper, nickel, iron ore, and diamonds. Although metals and minerals dominate Anglo-American sales, this is a great way to get into the diamond business. Anglo American controls 85 percent of the diamond business De Beers Group (the company behind the phrase "A diamond is eternal"), with the Republic of Botswana owning the remaining 15 percent.
De Beers and its partners generate over one-third of the world's raw diamond supply. De Beers also polishes and cuts diamonds and has retail businesses that offer completed goods to customers. Along with Anglo American's base metal output, this mining and diamond investment provides a semi-annual dividend to shareholders, so it's worth looking for income-seeking investors.
Jewelers Signet
Signet Jewelers is one of the major retailers of gemstone jewelry, and Kay, Zales, Jared, and other brands are among its subsidiaries. The corporation has 2,800 retail locations, most of which are in the United States. Following the COVID-19 outbreak, demand for jewelry has increased, and Signet's revenues (and stock price) have also risen.
Consumer preferences are changing due to the internet, and Signet has undertaken certain acquisitions to guarantee its relevance in the digital age. To enhance its e-commerce presence, it bought R2Net (parent of JamesAllen.com) in 2017, and in 2021, it bought jewelry rental start-up Rocksbox and tiny destination retailer Diamonds Direct. No way to knowing how long the gemstone sales surge will persist, but Signet Jewelers is a strong contender in this market.
Diamonds and jewelry are not the fastest-growing industries, but they have a particular place in people's hearts all around the world. Although investors shouldn't anticipate hypergrowth from investing in this sector, several tried-and-true firms are engaged in the creation of diamond jewelry and accessories that are worth considering.
Diamond Gems (OTC: GMDMF)
Gem Diamonds Ltd is a diamond mining exploration and development firm established in the United Kingdom. Lesotho (diamond mining operations); Belgium (diamond sales, marketing, and manufacturing); the British Virgin Islands, South Africa, the United Kingdom, and Cyprus are among the company's geographical sectors (technical and administrative services). It makes the most money in the Belgian area, and Letseng Diamond Mine and Ghaghoo Diamond Mine are two of its initiatives.
Diamond in Mountain Province (OTC: MPVDF)
Mountain Province Diamond is a diamond firm based in Canada. The firm combines natural rough diamond discovery, mining, and marketing in Canada's Northwest Territories.
The diamond stock has a $56 million market capitalization. Every day, it trades over 16,000 shares. In 2019, Mountain Province Diamond made $276 million in revenue.
Investing in lab-grown diamonds has exploded in popularity in recent years. Diamonds have been utilized as a wonderful method of transmission as a valued commodity. Incredibly, such a little object can be worth investing in.
The reality is that a million-dollar diamond may be housed in a very tiny safe as small as a diamond. It's pointless to believe that a diamond's hardness grade would cause anything to happen to it. All that's left is to make sure it doesn't disappear.
Lab-Grown Diamonds and Mined Diamonds are Compared
When purchasing diamonds, price comparison is an important thing to consider. A diamond is unmistakably not a stock. As a result, hundreds of thousands of jewelers and clients bidding online on a transparent platform cannot determine the price. However, requesting prices and comparing them is possible with so many internet merchants.
However, in the case of colored diamonds, it may be more challenging. If you deal with a specific colored lab-grown diamond, such as a pink or yellow diamond, you are definitely on your own.
However, selling a diamond is simpler than selling a marquise. Purchasing diamonds, especially those with a GIA certification, is recommended.
What is the Procedure for Investing?
If you want to invest in lab-grown diamonds, you must first study and comprehend the fundamentals, which begin with the 4cs. It's important to keep a budget for how much you wish to invest. Another thing to remember is that diversity protects you against Warren Buffett's stupidity.
For example, if you were planning to spend $40,000 on a lab-grown diamond, you should consider purchasing two $20,000 diamonds or splitting them into three equal halves. After that, buying several hues of diamonds rather than one of the same kind would be the greatest option. This will assist you in avoiding taking unnecessary risks since the price of each hue may fluctuate dramatically.
Another technique to ensure a successful investment plan is to purchase a lab-grown diamond at a lower price than you intend to sell it for. When you buy a diamond from a shop, you've gone through many brokers and intermediaries, each of whom must have taken their cut.
Buying a diamond for a low price does not imply that you are getting a bargain. Buying a lab-grown diamond for a low price means purchasing as far up the discount chain as possible. By purchasing directly from manufacturers, you may skip middlemen and brokers. In recent years, lab-grown diamond producers have established internet sites where they sell directly to clients.
If it is necessary to ask so many questions merely to obtain a decent deal, then it is necessary. It would be prudent to get advice from lab diamond specialists and consultants. Social media forums that debate and provide information on the diamond market might also be beneficial.
What exactly are laboratory-grown diamonds?
Lab-grown diamonds are becoming more popular. This is particularly true for younger customers who are worried about environmental, social, and corporate governance (ESG) problems. Lab-grown diamonds are more environmentally friendly and ethical than mined diamonds.
The tagline "a diamond is forever" by De Beers in 1947 made a diamond ring an integral aspect of becoming engaged. Since then, the diamond store has promoted mined diamonds as better, and Lab-grown diamonds were mostly utilized in industrial applications until recently.
Thanks to technological advancements, lab-grown diamonds are practically indistinguishable from mined diamonds, at least to human sight. The chemical makeup of the two varieties of diamonds is the same, and they are also physically and aesthetically identical. To tell one from the other, you'd need specialized laboratory equipment.
True, their roots are distinct. Over billions of years, mined diamonds developed around 100 kilometers underground. They result from the Earth's mantle's enormous pressure and heat. Diamonds were driven towards the Earth's surface by molten rock pouring through the mantle.
How do lab-grown diamonds get their shape?
Lab-grown diamonds may be made in two methods, and both processes begin with a "seed," a flat sliver of another diamond.
Extreme heat and pressure create diamonds, similar to how mined diamonds originate naturally underground. Carbon atoms are bound to the diamond seed using this high-pressure, high-temperature (HPHT) process.
The chemical vapor deposition (CVD) process is another approach to growing them. The CVD process produces diamonds by breaking down carbon-rich gas in a vacuum chamber, and the decomposing gas adds carbon and hydrogen atoms to the diamond seed.
What publicly-listed lab-grown diamond firms exist?
For investors interested in lab-grown diamonds, there are few publicly traded choices.
Even if you wanted to invest in De Beers' lab-grown diamond brand Lightbox, you'd have to invest in its parent firm, mining behemoth Anglo American Plc (AAL). However, precious metals like platinum and palladium, not diamonds, account for most Anglo-American sales.
Pandora (PANDY), a Danish jewelry firm, has debuted a jewelry line using lab-grown diamonds, although investing in Pandora is more about fashionable jewelry than diamonds.
The market capitalization of Brilliant Earth Group (BRLT): $816 million
Brilliant Earth Group Inc. (BRLT), created in 2005, is one publicly traded alternative. The company sells diamond engagement and wedding bands, gemstone rings, and other luxury jewelry. It sells both mined and lab-grown diamonds that it says are ethically sourced. Customers seeking further transparency may utilize blockchain technology to verify that their diamonds are ethical.
Of course, Brilliant Earth isn't the best place to buy lab-grown diamonds, but it does offer both and can switch to lab-grown if demand increases.
Brilliant Earth has a business plan that is asset-light. Its consumers usually pay it first, followed by its suppliers. This enables it to expand its operations without investing in new equipment. All of its showrooms are appointment-only, reducing the company's reliance on high-traffic sites and their related expensive rents.
Brilliant Earth reported revenues of $380 million in 2021 and a net profit of $26 million. However, the stock has lost more than half of its value during the last year, owing to concerns about high-flying growth businesses in a rising rate environment. Due to the conflict in Ukraine, the firm had to remove mined Russian diamonds from its website.
Foundry Diamond
Diamond Foundry Inc., a private firm specializing in lab-grown diamonds, was launched in 2012. Diamonds from the firm are employed in a variety of applications in the semiconductor sector, in addition to exquisite jewelry.
The diamond semiconductor technology developed by Diamond Foundry has the potential to considerably improve on the present silicon wafer technology used to manufacture chips. Its lab-grown diamond material may replace up to 99 percent of the silicon wafer in a microprocessor, boosting performance.
Leonardo DiCaprio, an Oscar winner, and a slew of other affluent people, have invested in the firm. Some of the company's other sponsors include Google, Twitter, eBay, and Facebook founders or early investors.
Although Diamond Foundry is not listed on a stock market, pre-IPO firms like it are often available to invest in via platforms like EquityZen. Employees or early investors might sell you shares in private enterprises on these sites
You must, however, be an accredited investor to invest in a private firm like Diamond Foundry. An accredited investor is someone who meets at least one of the following three criteria:
Has earned more than $200,000 in the last two years (or $300,000 with a spouse) and plans to do so again this year.
Has a net worth of more than $1 million, excluding their primary residence (either alone or with a spouse).
He was awarded one of three special licenses by the Financial Industry Regulatory Authority (FINRA)
However, pre-IPO investment has its own set of hazards. Information asymmetry is one of these dangers. Employees and early investors typically understand the business better than you do. If these people are selling their shares, they may be aware of anything negative about the firm. They may also need funds to purchase a home or pay for education.
Disclosure rules for private enterprises are similarly restricted. The Securities and Exchange Commission (SEC) mandates publicly listed corporations to provide a wealth of information to investors. Annual and quarterly profits are examples of such data. These restrictions do not apply to private businesses. As a result, investors find it difficult to make educated choices regarding a company's financial status.
Is It Wise to Invest in Diamond Stocks in 2022?
While investing in diamond firms may seem a safe bet, the stock market is not guaranteed to stay steady in 2022.
However, prices are expected to climb as more people purchase diamonds and fewer supplies are available.
Which Diamond Stock Is the Best?
LVMH With a market worth of $412 billion, Moet Hennessy Louis Vuitton (OTC: LVMUY) is our selection for the greatest diamond stock.
Cartier, Bulgari, and Tiffany & Co. are among the high-end jewelry brands owned by the firm. LVMUY also has a sizable luxury goods portfolio, making it a more appealing investment.
What Do Diamond ETFs and Stocks Have in Common?
Diamond exchange-traded funds (ETFs) allow investors to participate in the diamond market without buying and storing real stones.
On the other hand, diamond stocks allow investors to track the performance of specific diamond firms.
You may also get diamond exposure by investing in mutual funds.
Who owns the world's largest diamond company?
The De Beers Group is the biggest diamond firm in the world.
Although the firm is not publicly listed, it has several partnerships in which you may invest, including Mountain Province Diamond (OTC: MPVDF).
Is Diamond Mining a Moral Business?
Diamond mining is usually regarded as ethical due to the Kimberley Process, established in 2003 to curb the trafficking of "blood diamonds."
The Kimberley Process mandates that all raw diamonds be transported, marketed, and traced via a secure system to make it harder for blood diamonds to infiltrate the market.
Some businesses specialize only in synthetic diamonds.
Final Thoughts on Diamond Stocks
During economic downturns, diamonds don't typically do well since buyers focus on conserving money for necessities.
Consumers will have the additional purchasing power to make these large purchases once the market improves.
As a result, investors that get in early might reap significant rewards.
On the other hand, the stock market offers no promises.
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