Sarine Technologies

[holymage]

The illicit competition may be temporary, but I think a larger factor that hasn't garner sufficient attention is the possibility of structural change in consumer habit. Research on the industry is definitely lacking. I read somewhere that China is the 2nd largest market for diamond (US being the first), and many articles reporting that Chinese millennials has changed from "material wants" to "experiences" like travelling etc. Even within the "material wants" categories, there are emerging competitors vying for the consumer's wallet, like... the technology gadgets. Would you rather spend on the latest smartphone/tablets, or a piece of diamond?

Sarine's latest Q3 2017 quarterly report stated that there is higher than normal surplus inventories of polished diamonds. This problem started in 2015 and persist till 2017, despite several premium consumer products companies reporting record revenue and profits (Kweichow Moutai, Pola Orbis, Apple etc). Could it be that the declining demand for diamonds is insufficient to deplete the existing inventory of diamonds? If that is the case, is it justified to classify Sarine as a growth stock, given its market leader position in a declining industry? More research is definitely needed.

If this structural change is real and demand for diamond is expected to dwindle in the years to come; while diamond is no buggy whip, Sarine definitely do not deserve a P/E meant for a growth stock.

Good luck to those vested.