In Search of Shine at Tiffany's

Counterpoints:

• Strategic struggle: brand vs. growth.
  Tiffany needs to walk a fine line between cheapening the brand to pick up sales and forgoing growth to preserve the brand and resulting profits. This is perhaps more of a risk than an absolute negative, but it bears watching.
• Poor control over supply costs.

  Most Tiffany products are made of gold, silver or diamonds, and increases in commodity prices add cost pressure. Fortunately, good design and a strong brand have allowed Tiffany to pass increases on to the consumer.

• Price.

  Like the product, the stock in the high $30s might be a bit expensive. It has been stuck in a $20-$45 trading range for seven years. The price-to-sales ratio exceeds 2, and the P/E ratio exceeds 20 -- a bit aggressive for a company growing at about 10%.

  But same-store sales are increasing at about 6%, and the company does pay a small dividend and has repurchased some shares.

Bottom line: Tiffany & Co is a pick. Although expensive, it's a good business with lots for the value-oriented investor to like -- brand, cachet and a business model eschewing the "big is best" mentality.

Brand, customer experience and international exposure all rate higher than closest competitors Blue Nile (NILE Quote) and Zale (ZLC Quote). Clearly, Tiffany is the Nordstrom's (JWN Quote) of the jewelry trade.

On price dips, I'd be adding Tiffany to my investment outfit.