Marathon Asset Sells Blue Nile, Inc. (NILE) Down the River

While Amazon has managed to convince consumers that it is safe to purchase TVs and computers online, I still see the same type of jewelry market reshaping as being much more difficult. Something as meaningful and lasting as a piece of jewelry, namely an engagement ring, is generally a sizable purchase that should remain an in person experience. For investors looking to get some exposure to the higher-end consumer markets, Tiffany may well be the best bet. Recent sales numbers showed strength for the holiday-season (Nov.-Dec.), where the retailer saw same store sales growth of 7% in its Asia segment, and the company expects to post 4% company-wide sales growth in fiscal year 2014 (ending Jan.).

Don’t be fooled

During the two instances that Blue Nile’s P/E has risen about 60 times over the last five years, the stock returns to a more normalized trading range of 35 times to 45 times:

I tend to agree with Marathon in the respect that Blue Nile may be ahead of itself and now could be a good time to take some money off the table. Even on the high end ($0.75 per share) of Blue Nile’s recently released 2012 earnings guidance, where full year 2012 EPS is expected to come in between $0.70 to $0.75, the stock appears to be fairly valued. This assumes a 45 times P/E multiple on 2012 EPS estimates, where the 45 P/E is both the industry average and a normalized company P/E. In fact, Blue Nile has traded three times the S&P’s price to earnings ratio on average for the last five years, and now the stock is trading at 3.8 times (check out all the hedge funds loving Blue Nile). Billionaire Ken Griffin is another big-name investor that has also been dumping Blue Nile. Griffin sold off 89% of his shares during the third quarter and now owns less than 100,000 shares (check out what Griffin traded in Blue Nile for).

The article Marathon Asset Sells Blue Nile Down the River originally appeared on Fool.com and is written by Marshall Hargrave.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.