Home Depot: Strike While the Iron Is Cold

  • Home Depot (HD) stock has lost one-quarter of its value this year.
  • There is nothing wrong with the company. They just hiked the dividend.
  • Investors buy good companies when they’re down and let time work for them. Therefore, HD stock is one to buy now.
Home Depot (HD) storefront on a sunny day
Source: Jonathan Weiss / Shutterstock.com

Home Depot (NYSE:HD) is a good company to own.

If a company is good when the market is hot, it’s probably good when the market is down. That means can buy Home Depot stock today for a price-to-earnings (P/E) multiple under 20, and get a dividend yielding over 2.5%.

The April 26 price of $303 per share is more than 25% less than it was on Jan. 1. Shares last peaked in December at over $400 each. If you were tempted to buy them there (and admit it you probably were), you should be ecstatic to get them here.

Assuming you’re an investor and not a speculator.

HD Home Depot $302.88

Using Time With HD Stock

The difference between an investor and a speculator is time. Speculators don’t have much. If a good company’s stock is down after a day, a month, or three months, speculators won’t feel encouraged to buy it. They will see red on the screen and look for what’s hot.

Investors look ahead three years, five years, even 10 years. If a company is worth buying at the market’s peak, it will be worth buying at the trough.

Home Depot is worth buying. Its track record is clear. Over the last 10 years you have a gain of 541% on Home Depot. That’s more than double the gain on the average S&P 500 stock. Look back over the company’s income statements and you will see steady growth, in both revenue and profit. Home Depot’s management has been through hard markets. They just hiked the dividend.

Home Depot next reports May 17, and it should be pretty good. The spring quarter is Christmas for Home Depot and its main competitor, Lowes Companies (NYSE:LOW). Revenue is estimated at $36.4 billion, and net income at $3.67 per share. Both figures would be down from last year.

If the company misses estimates by a little expect to hear panic on your TV set. Laugh and buy.

The Macro Picture

When an investment’s numbers are down 3% but the stock is down by 25%, that’s called a bargain. That’s when investors buy low, while speculators run off for the next bright, shiny object.

Results should be down because money costs money, because housing is tight, and because homeowners may put off big projects as a result. But the house will need painting, the garden will still need planting. My Home Depot is crowded right now. I suspect yours is too.

There are 19 analysts watching Home Depot at Tipranks, and only three aren’t telling you to buy it right now. The average price target is just 22% ahead of the current price. In other words, they don’t expect to see the recent highs again for over a year. Home Depot, they say, is “underperforming.”

This isn’t a Broadway show. This is your college fund we’re talking about, your retirement, you or your family’s future. If you’re an investor, this is when you buy. You buy low. When everyone is screaming buy and the price is high, that’s when you take profits.

The Bottom Line on HD Stock

Home Depot may not grow in 2022. Interest rates and a slowing housing market are the reasons.

But there is nothing wrong with the company, or its business model. Home Depot continually tweaks that model to improve its customer experience.

When should you sell Home Depot? When you need the money, and when the housing market is hot. You have taken a loss these last four months and, if you have an investor’s patience, you’re probably looking to buy more.

That’s the difference between you and a speculator, anxiously watching the TV and looking for a fast buck. Slow bucks spend good. Buy HD stock.

On the date of publication, Dana Blankenhorn held no positions in companies mentioned in this story. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com, tweet him at @danablankenhorn, or subscribe to his Substack.


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