As the U.S. economy rebounds there is little doubt that larger ticket luxury type items like fine jewelry will be in greater demand. But that doesn't necessarily mean that investing in jewelry stocks makes perfect sense at this point in time.

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All that Glitters...
Zale Corp (NYSE:ZLC) was a hot topic during the week. There was speculation that a private equity firm could take a stake in the Texas-based retailer. But that in and of itself doesn't seem like a good reason to cozy up to the stock right now.

While Americans are likely to spend on jewelry as the economy advances, it's unlikely that the masses will clamor for sparkly stuff anytime soon, as the economy on Main Street still has a ways to go to fully recover. Moreover, individuals who are in the market for an engagement ring or a special piece of jewelry are going to be more likely to shop around in the months ahead. Stores like Macy's (NYSE:M) or Nordstrom (NYSE:JWN) may get some play. For some pieces, individuals may even choose to frequent discount stores.

Great Expectations
From an expected earnings standpoint, Zale doesn't seem attractive. Presently, analysts are expecting the chain to lose $3.55 per share this year and $1.92 next year. Of course, if its prospects were to change dramatically, if profits were just around the corner. But that remains to be seen.

Tiffany (NYSE:TIF) is a New York-based company that has a reputation for selling top-line jewelry. Its reputation and merchandise selection is stellar, and the company can have a very bright future in terms of its earnings potential. However, there are some risks to the equation right now.

For one, its stock has had a very sizable run, so some profit taking wouldn't surprise. Second, from a price to expected earnings standpoint it isn't hyper expensive, but it isn't exactly a bargain basement deal either. It trades at 19.6-times this year's estimate, which is $2.50. If the stock were to pull back to the upper $30s, it could draw some more interest.

The Bottom Line
Americans have a penchant for the shiny stuff. But right now, neither Zale nor Tiffany appears appetizing. (For more stock analysis, take a look at America's Top Dividend-Paying Stocks)

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