In Search of Shine at Tiffany's

So with that backdrop, let's look at Tiffany not as just a shiny adornment to your ears or ring finger but as an investment to shine in your portfolio.

Here are my points and counterpoints.

Points:

• Exclusive brand.

  Few would argue that the brand is the strongest asset. Tiffany has maintained its brand promise with unique, elegantly simple design and superlative, special designers.

  With one of the most recognizable names in the business, brand strength is wide enough to appeal across markets -- high-end and midrange buyers, U.S. and international markets -- but narrow enough to bring consistently high margins and resist competition. The company enjoys an unusually wide protective moat for the industry.

• Excellent operating cash flow.

  Operating cash flow far exceeds expansion needs. Tiffany is in a unique situation -- its strategy is to not add too many stores. That's a big plus compared with most retailers.

• Strong international presence.

  As strong as Tiffany is in the U.S., the overseas potential is huge. The company is well positioned to take advantage of international growth and the weak dollar.

  Of the 17 planned new stores for 2007, 10 are overseas. Overseas sales account for about 40% of total business. Japan is about half of that, so Tiffany is a particularly strong play on a Japanese and Asian consumer recovery. There are four stores in China already; expansion in that country will be interesting to watch.

  International markets are the most promising growth path for sales and especially profits. I like to find ways to play international growth while keeping my capital at home; this one works.