Home Depot
operates a chain of retail building supply/home improvement stores in the US , Canada , Mexico and China . The company has grown profits and dividends
at a 7-20% pace over the past 10 years earning 14%+ return on equity. HD experienced difficulties in the 2007-2008
economic downturn; however, the company took steps that have led to improvement
in its profitability. This trend should continue as a result of:
(1) altered its
in-store focus designed to maximize profitability and to make them simpler,
more customer friendly,
(2) the
company’s size and dominant market position in a highly fragmented industry
allows it to achieve economies of scale in purchasing products and to develop
exclusive brands with selective suppliers giving it a competitive advantage,
(3) expanding
its e Commerce capabilities,
(4) share
buybacks.
Negatives:
(1) it is in a
highly competitive industry,
(2) a high
unemployment rate will keep a damper on consumer discretionary spending,
(3) its
international exposure increases the risk of losses from currency fluctuations.
Home Depot is
rated A++ by Value Line, carries a 43% debt to equity ratio and its stock
yields 2.1%.
Statistical Summary
Stock Dividend Payout # Increases
Yield Growth Rate Ratio
Since 2004
HD 2.3% 16% 43% 8
Ind Ave 1.5 14 37 NA
Debt/ EPS Down
Net Value Line
Equity ROE Since 2004 Margin Rating
HD 55% 57% 3 8% A++
Ind Ave 27 31 NA 8 NA
Chart
Note:
HD stock made great progress off its March 2009 low, quickly surpassing the
downtrend off its July 2007 high (straight red line) and the November 2008
trading high (green line). Long term,
the stock is in an uptrend (blue lines).
Intermediate term it is in an uptrend (purple lines). Short term it is an uptrend (brown
lines). The wiggly red line is the 50
day moving average. The Dividend Growth
and High Yield Portfolios own 80-85% positions in HD. The upper boundary of its Buy Value Range is
$47; the lower boundary of its Sell Half Range is $128.
9/14
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