Diamonds last forever...Not according to De Beers. Sarin getting closer to my heart.

Oh what a great monday. A great start the new week. The markets once again sold off, taking its cue from poor performance in the US last friday. Worried or not? I spoke to a seasoned fund manager today and he was telling me that it was just a short term correction and there was nothing to really worry about.

He did however, say that the Euro Zone sovereign risk issue is going to drag on. Interestingly, he shared a fun fact with me on the Greeks. Did you know, that in Greece, you actually get a bonus if you turn up on time for work? Now that is just a great way to work isn't it? Now you know why they have to turn to austerity measures to cut their deficit. Can you imagine, living a life of excesses till this extend? I wish I lived in such an extent, then I would not be here thinking about the next big stock to buy.

Anyway, you might ask yourself why would I bother to find time on a monday to do another post? It must be something pretty urgent that has made me feel the need to post on a day which I was worked till my finger tips burnt from excessive typing. Well contrary to what you believe, I am writing this post to remind myself to keep monitor a particular stock.

Before talking more about the stock, I would like to state my reasons to why I think this is a stock to keep for the next year or so. You will be surprised by this post because for the first time, I am reiterating a buy on a stock I have called before.

When I was fingering through last week's papers (trust me, it was a ton, Wall Street Journal, FT, BT and The Edge), I saw 4 articles writing about the same topic, what was that? Diamonds. So I think there is no need to say anymore and you should be able to guess that the stock I am going to push for once again is Sarin.

Let me cite a few quotes to back up my case:

"De Beers believes the supply of diamonds is running out over the long term, prompting the world's biggest miner of the gems to reduce production in an attempt to extend the life of its mines."

"Assuming the move moderated production, rough diamond prices could rise by at least 5 per cent per year for the next five years, said Des Kilalea, analyst at RBC Capital Markets."

"For 20 years, the industry has found no new diamond deposit to match De Beers' two biggest mines in Africa or the best Russian mines of Alrosa, the other big diamond producer."

"Diamonds are a treasure of nature that should be properly protected, because there will be less to sell. The reality is that supply cannot keep up, and that will become very accentuated over the next 15 years."

"China's affluent urbanites are buying diamonds in droves and the country's share of the diamond jewellery market should double to 16 per cent by 2016."

While the whole world focuses on gold, silver, precious metals, energy etc but they have not looked at diamonds. The fact that diamonds are often considered the rarest of all gems and with every single woman in the world looking for one carat flawless diamond ring to put on their fingers, I would say that it is a way overlooked industry.

Unpolished diamonds have been surging in price over the past year, rising more than 50% while polished diamonds have lagged in price. Currently, an unpolished 1 carat diamond costs US$139 and a polished 1 carat costs US$5333. Why such a big difference? Because only after you polish the diamond, you can be sure about the colour and the clarity of the diamond. Once the uncertainty is taken away, the diamond is worth its true value.

Sarin's new Galaxy scanner will allow people to gauge the clarity of the diamond before its polished. Imagine how much would the gap of unpolished diamonds would narrow if the clarity of the diamond can be determined before its polished? Of course, the colour of the diamond still needs to be determined, thus the gap will always be there, but at least one of the variables is cleared. Sarin is the outright leader in Diamond grading technologies and what I love is the niche and the leadership position it is in. Thus I continue to call for a strong buy on this stock, especially with the diamond industry picking up quietly.

Thats all I have. If I type another paragraph, I will be peeling skin off my finger tips.

Best,

SVI