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Five Takeaways from the Stock Market in 2017

Jan 1, 2018 3:12 AM   By Joshua Freedman
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RAPAPORT...
 In a year of soaring stock prices, US retail shares largely underperformed in 2017 as consumers (and investors) abandoned traditional shopping channels in favor of e-commerce platforms. As a result, familiar names such as J.C. Penney, Macy’s and Signet Jewelers slipped this year. So too did diamond-focused miners, amid fears of an excess of rough-diamond supply and questions over the future of consumer demand.

Here are the main points emanating from this year’s stock performances:

(For the full stock table, see below)

1. US Retail Plunged

Investors showed little confidence in brick-and-mortar retail, moving away from stocks such as J.C. Penney (-62%) and Macy’s (-30%). The latter showed signs of recovery in the final two months of the year as consumer confidence grew ahead of the holiday season. The sector trailed the Dow Jones Industrial Average, which jumped 24% during the year, buoyed by an improving economy. There was a strong contrast between traditional retailers and tech-driven companies, with Amazon’s share price surging 54% this year, while Apple’s was up 46%.

Signet (-40%) suffered along with its retail peers, though it also had company-specific challenges, such as sexual-harassment allegations and problems with its credit services.

2. Tiffany Beat Its Rivals

The arrival of Alessandro Bogliolo as CEO and Reed Krakoff as chief artistic officer, plus some innovative branding decisions, have boosted confidence in Tiffany & Co.

“New management is showing us that they understand the challenges and opportunities, and they are not sitting still,” CNBC cited Citi analysts as saying in mid-December. The bank upgraded Tiffany’s stock to “buy” from “neutral” in time for the holiday season.

Investor behavior reflected this optimism throughout the year: The jeweler’s stock soared 33%.

3. Asian and European Stocks (Mostly) Rallied

A recovery in China and Hong Kong has given new life to the region’s retail sector, with jewelers such as Luk Fook (+67%), Chow Tai Fook (+37%) and Chow Sang Sang (+31%) benefiting in terms of both their sales and their share prices. Those stocks mirrored gains on Hong Kong’s Hang Seng Index, which jumped 36% for the year.

Out of the Far East stocks that Rapaport tracks, Israel-based Sarine Technologies, which lists its shares in Singapore, performed less strongly, declining 44%. An excess of polished diamonds in the Indian manufacturing sector resulted in weaker sales of the company’s machines.

European luxury stocks also had a strong year, driven by a recovery in consumer demand, after 2016’s political shakeups had hit public confidence. Kering, which owns jewelry brands Boucheron and Pomellato, was the top performer, gaining 81% for the year.

4. Diamond Producers Fell, but Diversified Miners Rose

It was a bad year for the stock prices of Firestone Diamonds (-81%), Petra Diamonds (-51%) and Mountain Province (-49%), and pretty much every other diamond-focused miner. Each company had its own specific reasons for the decline, but the overall picture showed the impact of a rough oversupply in view of increased production at the major miners and three new mines that came on stream during the year.

By contrast, shares in Anglo American, which owns De Beers, gained 33%, while Rio Tinto was up 24%. This reflected stock rallies in the mining sector, mainly because of rising metal prices.

5. India Recovered from Demonetization

Led by Titan Company (+153%), the Indian jewelry sector showed a huge rise. The industry has enjoyed an improvement in demand compared with this time last year, when the government’s November 2016 decision to invalidate 86% of currency notes hit liquidity.

Selected global industry stocks in 2017:

  Dec 29, 2017 (close) Jan 3, 2017 (open) Chng.  
Stock Indexes       Chng.
BSE 34,056.83 26,616.92 7,439.91 28.0%
Dow Jones 24,719.22 19,872.86 4,846.36 24.4%
FTSE 7,687.77 7,142.80 544.97 7.6%
Hang Seng 29,919.15 21,993.36 7,925.79 36.0%
S&P 500 2,673.61 2,251.57 422.04 18.7%
         
USA        
Birks Group $1.30 $1.06 $0.24 22.6%
JCPenney $3.16 $8.35 -$5.19 -62.2%
Macy's $25.19 $36.13 -$10.94 -30.3%
Signet $56.55 $94.79 -$38.24 -40.3%
Tiffany $103.95 $77.89 $26.06 33.5%
Walmart $98.75 $69.24 $29.51 42.6%
         
Far East        
Chow Sang Sang (HKD) 18.88 14.46 4.42 30.6%
Chow Tai Fook (HKD) 8.20 5.99 2.21 36.9%
Luk Fook (HKD) 33.55 20.15 13.40 66.5%
Sarine (SGD) 1.00 1.80 -0.80 -44.4%
         
Europe        
LVMH €245.40 €182.10 €63.30 34.8%
Kering €393.00 €217.30 €180.00 80.9%
Richemont CHF 88.30 CHF 68.25 €20.05 29.4%
Swatch Group CHF 397.40 CHF 319.20 €77.50 24.5%
         
INDIA (rupee)        
Asian Star 1,347.85 695.00 652.85 93.9%
Gitanjali Gems 68.30 58.25 10.05 17.3%
PC Jeweller  456.60 195.05 261.55 134.1%
Titan 856.00 339.00 517.00 152.5%
         
AUSTRALIA        
Michael Hill AUD 1.23 AUD 1.23 AUD 0.00 0.0%
         
MINING STOCKS        
ALROSA RUB 75.06 RUB 97.50 -RUB 22.44 -23.0%
Lucapa Diamond AUD 0.22 AUD 0.43 -CAD 0.21 -48.8%
Lucara Diamond CAD 2.81 CAD 3.14 -CAD 0.33 -10.5%
Mountain Province CAD 3.41 CAD 6.75 -CAD 3.34 -49.5%
Stornoway Diamond CAD 0.66 CAD 1.00 -CAD 0.34 -34.0%
UK (pence)        
Anglo American 1,549.50 1,166.00 383.5 32.9%
Firestone Diamonds 9.75 51.02 -41.3 -80.9%
Gem Diamonds 71.00 110.00 -39.0 -35.5%
Petra Diamonds 78.00 160.10 -82.1 -51.3%
Rio Tinto plc 3,942.00 3,168.50 773.5 24.4%

Image: Bacho/Shutterstock
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Tags: Alessandro Bogliolo, Amazon, Anglo American, boucheron, Chow Sang Sang, Chow Tai Fook, citi, De Beers, Dow Jones, Firestone Diamonds, Hong Kong, India, J.C. Penney, Jewelry, Joshua Freedman, kering, Luk Fook, Macy’s, mountain province, Petra Diamonds, Pomellato, Reed Krakoff, retail, Rio Tinto, Share prices, Signet Jewelers, Tiffany, Tiffany & CO., Titan Company
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