Window Shopping for Jewelry

 | Sep 15, 2012 | 2:30 PM EDT
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I recently wrote about the technical weakness in former leader Tiffany (TIF), contrasting it with fellow luxury goods maker Michael Kors (KORS). The latter has been a star performer since Aug. 14, when it leapt 16.5%, clearing a five-month consolidation.

But today I wanted to look a bit further into the jewelry-and-accessories industry. The space has seen a rotation out of some one-time growth pacesetters, like Tiffany, and into a new set of names.

For instance, on Friday watch-and-accessories maker Fossil (FOSL) jumped 11.4% after the company said chief financial officer Michael Kover would retire in March.

That was somewhat unusual. It's not atypical to see a stock vault higher on the exit of a CEO who has presided over a downdraft in share price, but not so typical when a lower-level C-suite officer bows out. Of course, it's possible that some of the move simply came in tandem with market enthusiasm after the Federal Reserve's Thursday announcement of its latest round of quantitative easing.

Despite the price move, and whatever the cause, the stock's technicals leave much to be desired. Fossil's 50-day moving average remains significantly below the 200-day line -- not exactly a bullish scenario. The stock found support just below the 200-day. Under these conditions, a buy would be too speculative for my liking.

But fellow watchmaker Movado (MOV) has been showing technical strength that's more in line with Michael Kors' recent performance. On Aug. 28, the stock gapped up 17.4% on monster volume following a better-than-expected second-quarter report. Not only did the company beat views, but it also raised its full-year earnings guidance.

Since that move the stock has gained 3.8%, and it's been trending along its five-day moving average. Such support is often a precursor to further price gains.

The earnings picture for Movado is bright, as well: The company has sported double-digit earnings growth in the past three quarters. Unfortunately, revenue growth has decelerated during that time, so it's not an ideal situation. Still, analysts are expecting earnings growth of 30% for fiscal 2013 (ending January 2013) and 16% in fiscal 2014. The earnings performance has steadily improved since a $0.13-per-share loss in 2010.

Meanwhile, online jeweler Blue Nile (NILE) has been in rally mode lately -- although it reversed off a seven-month high Friday, defying the broader market uptrend. Nonetheless, the stock has been on a tear since gapping up from a three-and-a-half-year low in early August, getting solid support along its five-day EMA.

The fundamentals, though, tell a different story. Earnings have declined or been flat on a year-over-year basis for the past six quarters. Revenue performance has been erratic. Analysts expect earnings per share of $0.72 this year, 6% lower than 2011 results. Next year, that number is seen growing to $0.90 per share, 25% higher than 2012 targets.

Blue Nile is a small company, with a market capitalization of just $518 million. It trades about 321,000 shares per day, on average. The stock has a high beta, 1.78, an indication of its volatility as compared with the broader market. Small, highly volatile stocks do not tend to rank among my favorites. Furthermore, I'd be cautious about jumping in before the company resumes its earnings growth.

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