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Strategies & Market Trends : Value Investing
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To: Paul Senior who wrote (2634)12/4/1997 10:42:00 AM
From: Stewart Whitman   of 78684
 
How about De Beers (NASDAQ:DBRSY) - South African Diamond monopoly? They are selling very close to or below book value (I believe). Aside from the normal foreign investment problems (currency, politics, etc.), there are two concerns.

The first concern is Southeast Asia. Japan and other Southeast Asia are large consumers of industrial diamonds used for manufacturing. Also, Japan is also a large consumer of diamonds used in jewelry. This problem is clearly temporary.

The second concern is that "cracks" are showing up in their control over their monopoly. Recently, diamonds from Russia have been sold on the open market (not through their marketing organization, called the CSO) and some Australian mines have elected to sell their directly. There has also been a big discovery of diamonds found in northern Canada - it has been estimated that this source could provide upto 20% of the worlds diamonds in 2002. How these diamonds will be sold remains to be decided. However, it's pretty clear that a price war won't benefit anyone - think of the attraction of a $100 wedding ring. So, its unlikely that selling prices will dramatically change in any event. And the CSO has been challenged before.

Unique position. Track record. Reasonable dividend. Brand name. I'd really like a second opinion. For information, try starting at:

edata.co.za

Stew
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