Monday, October 15, 2007

Blue Nile

Blue Nile (NILE 81.84)
Shares outstanding 15,889,000
Institutional ownership 19,528,391
Market cap $1.3 billion

Another heavily shorted stock. Did you notice that just the institutional ownership alone exceeds by 3,639,391 the the total shares outstanding? There is plenty of demand for the stock, from both shorts and longs, but Citigroup's Mark Mahaney downgraded the stock on Friday to a sell but left his target at 88. He felt that NILE would miss revenue estimates, or be in line at best. They report November 6. I think you need to buy the stock for a trade at these levels, and that the hedge funds that are short, got a gift from Citigroup, and will try and cover here.

The picture on the right is Lake Tana, the source for the Blue Nile, known in the Greek as Psebo, discovered by Straba in 22 CE, and known now as the "blue valentine." Lake Tana's center is at 12 degrees N, 37 degrees E, and is 1400 square miles with 37 islands, with 19 monasteries, one of which, legend says, stored the ark of the covenant along with other treasures. (Psebo in Greek is: psi epsilon beta omicron= 700+5+2+70= which adds to 777).

The most famous Blue (tavernier) diamond in the world, is the Hope Diamond. Jean Baptiste Tavernier, hocked it from the Hindu god Siva's, third eye, which represented fire, while the other two eyes represented the sun and the moon. He sold it to Louis XIV in 1668. 300 years later, before it made it's final home in the Harry Winston gallery in the Smithsonian, the diamond's phosphorescence was checked by gemologists. If you shine an ultraviolet light on a diamond, and the diamond glows afterwards, that's known as it's phosphorescence. The presence of one boron atom, a conductor of electricity for every million atoms of carbon, allows this to happen. The Hope's phosphorescence was expected to be light blue, but instead it glowed "orange red like a fireball." The eye did represent fire.

Diamonds can capture the imagination, and the shorts of NILE shouldn't underestimate the psychology of stock investors. It's more with the public than the pros; just witness the action in the Chinese stocks. Compare the market cap of Amazon to NILE. Another river card that's an ace? They say diamonds are forever. Some shareholders may think the same.

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