Blue Nile, Inc. (NILE)

andersons21 (< 20) Submitted: 6/29/07 11:34 AM

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I agree that for the research-oriented consumer, Blue Nile offers a great shopping experience. However, in my experience most people just don't want to learn the level of detail offered by Blue Nile, so I don't know how much of an advantage that will be overall.

My concerns about this stock are that
1) it looks very expensive, and
2) there's no moat. Big competitors are entering the build-your-own ring marketplace, namely Amazon and Costco. NILE is the best website for now, but Costo has great pictures and a great existing customer base of members, and Amazon has a slightly better, IMO, interface for choosing features and a huge customer base as well. Both companies with deep pockets could easily offer equally good education and interface for shopping experience. Costco is already famous for great customer service. Diamonds and their prices are standardized; any retailer offering rock-bottom prices (pun intended) is selling essentially the same thing.

I would see a potential competitive advantage for an internet retailer partnered exclusively with high-demand setting designers (if there is such a thing) to offer unique designer settings plus the ability to customize the major diamond. Otherwise, with equivalent ratings in the 4 C's, a diamond is a diamond is a diamond, and anyone can build a great web site to sell them.

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LeoFender (< 20) Submitted: 7/26/07 9:58 AM

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I happen to see a quickly emerging moat for this company. The contracts it has in place and the cash float for purchasing diamonds prevents others from stealing business away from NILE. Also it's "first to market". What other business follows BlueNile.com's model? Sure you can buy diamonds online, but NILE is THE place to buy diamonds online. Similar to EBAY's large moat (formerly an emerging moat), there were several places online to buy or sell goods in an auction style environment, however, EBAY was THE place to conduct business. EBAY's valuations, also scary, kept many investors away. Over the long run though, EBAY has been a good company. Nile is in a similar position. I LOVED it at 28 dollars a share and was buying shares like they were going out of style. I don't know that I'm buying more now, but I don't like to bet AGAINST great companies.

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Hibachi0 (99.81) Submitted: 7/31/07 12:52 PM

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There is no moat for this company. Diamonds are diamonds, and the internet is internet. Guys want the best diamond for the best price.

This company is in no way like ebay. Blue nile may be the place to shop right now, but the destinctive difference betweeen ebay and blue nile is that ebay is an auction company. they have a moat because the more buyers, the more potential sellers. no one wants to list on a smaller auction site, because the fees they save are so small that it is not worth the diminished market base.

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ikkyu2 (98.58) Submitted: 8/07/07 3:59 PM

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NILE's unusual and special contracts with diamond suppliers are allowing it to offer diamonds for as much as 40% off the going 47th St. market price. People who buy build-your-own rings from Amazon, Costco, or other places are not going to be pleased when they discover they could have bought the same ring for nearly half the cost. That is NILE's moat and it is very deep and full of sharks.

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LeoFender (< 20) Submitted: 8/30/07 8:34 AM

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The longer Nile maintains the moat, the wider it gets as well. I believe the moat is still on the narrow side. As it would be possible for a Zales or Shane Co. to step in and challenge Blue Nile as things stand right now. Both have tried to market the online business, but cannot afford to sacrifice any retail for cyber space. With no other companies challenging them, that moat will become wider and wider until this company is a large mid-cap. I bought in around 26, and sold due to NEED. I would still be holding my shares, though I am always a little gun shy when a security triples in just over a year. I always need to ask myself, is Mr. Market going to go through buyer's remorse? I believe the answer to this question is YES, which counters another one of my points, NEVER bet against a good company. Strong cash flows, balance sheet, sustainable growth, solid management. Would I bet against NILE!?!? H3ck no!!!

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