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I have 81 consecutive profitable trades of 15% or better. How is this possible? Every day there are hundreds of stocks setting new highs, no matter what happens in the overall market. Many of these stocks are still at very reasonable valuations. Afraid of buying stocks at their highs? Think of it this way: a new high is really a future floor for companies with solid financial underpinnings. Quantitative momentum modeling makes it easy to identify stocks that can continue this upward momentum trend. Why does this happen? It's really very simple..ask me about what investors and cows have in common. I am $$$ MR. MARKET $$$. I AM HUGE!!! Bring me your finest meats and cheeses. You can join in on the fun. Register for free and you'll be able to post messages on this forum and also receive emails when $$$ MR. MARKET $$$ makes his own trades. ($$$MR. MARKET$$$ is a proprietary investor and does not provide individual financial advice. The stocks mentioned on this forum do not represent individual buy or sell recommendations and should not be viewed as such. Individual investors should consider speaking with a professional investment adviser before making any investment decisions.)
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  1. #1

    Default HD ==> The Lion Winner

    $$$MR. MARKET$$$ is a proprietary investor and does not provide individual financial advice. The stocks mentioned on this forum do not represent individual buy or sell recommendations and should not be viewed as such. Individual investors should consider speaking with a professional investment adviser before making any investment decisions.

    I may be $$$MR. MARKET$$$, but I am far from Mr. Fixit. On the other hand, my brother is actually very handy. He is always doing projects. His family is thrilled with his skills. He asks his daughter if she wants to go to Home Depot:



    Then he asks his neighbor if she wants to go to Home Depot:



    Then he asks Elvis if he wants to go to Home Depot:



    No one wants to go to Home Depot. But the fact of the matter is, if you end up going to Home Depot thinking you’re going to spend 50 bucks, you end up leaving after you spend $500. So this got me thinking, why not just buy their stock.

    Yesterday I bought Home Depot (HD) at 115.07. I will sell it in 4 – 6 weeks at 132.58. Here’s why I love Home Depot:

    You have to really love this chart. It just keeps going up and up and up and up and up.





    The stock is up 40% this year and its PE is only 24. It’s a growth stock! It’s a value stock! It’s super stock! It also pays a 2.1% dividend so you make money while you’re waiting for the stock price to go to 132.58.

    I’m sure I don’t have to tell you what Home Depot is. If you’ve never seen a Home Depot, then you’re probably living on Mars, like Fuffrey.

    HD is a $150 billion market cap company that is the world's largest home improvement retailer. The company operates a chain of more than 2,200 retail warehouse-type stores, selling a wide variety of home improvement products for the do-it-yourself and home remodeling markets.

    What’s so great about this company? Why not just ask the customers:

    “My husband and I frequently shop at this Edison Home Depot. The staff is very helpful and always ready with answers to questions we may have.
    After a recent purchase, an employee, Marc, assisted me to my car. During the walk, he expressed how pleased he was with his manager, Tony. Marc was truly a happy employee, which is rare these days!
    I, myself was very impressed with Tony, he is professional, knowledgeable and pleasant. Home Depot is fortunate to have a manager such as Tony!
    Happy Holidays!”

    “This place is tops as far as Home Depot stores go. I find what I'm looking for most of the time and I shop in every single department from flooring to electrical to building to plumbing. When I don't find what I'm looking for - they order it, and it ships free to the store (which saves a ton of money on big items).

    I also like the fact that they don't hassle you over return items. That's great for projects because you can buy whatever you might need and return the unused stuff when you're finished.”

    “The staff here are incredibly helpful, friendly, and demonstrate love for their respective departments. The lady in the garden center who helped me today admitted that she tends to talk on and on, but it's clear she loves plants and gardening- the perfect person to work in the gardening center! Some of the items I needed were out of reach, and the staff that helped me didn't act as if I was being a bother- they were happy to help out, too!”

    You could go one and on.

    HD recently raised its quarterly dividend by 26% to 59 cents a share, or $2.36 for the full year, for a 2% payout. Increasing the dividend means that management is confident of future cash flows. Its five-year earnings growth rate is an impressive 23%. Home Depot has benefited from an improving economy and housing market. Recent data suggest solid, if not improving, consumer spending trends in the US.
    Worried about the Fed finally tightening up interest rates? shares of Home Depot tend to perform well and outperform the S&P 500 through the early to mid-stages of Fed tightening cycles. The stock price, according to some geek models, is almost 60% smaller than its intrinsic value, so we can say that the stock is undervalued and subject to a potential buy.

    The recent obliteration of Lumber Liquidators (they supposedly put formaldehyde in their floors) will send their customers fleeing to Home Depot for their lumber and of course will purchase everything else on the Home Depot shelves when they are there. Yup. You go to buy a 2 x 4 and you end up with a new gas grill.

    Improved homebuyer demand at the start of 2015 vaulted pending-home sales in January to their highest level since August 2013. This marks the fifth consecutive month of year-over-year gains, with each month accelerating the previous month's gain. On top of this, it costs less to add a bedroom than to buy a bigger house and recent surveys reported widespread optimism among home renovation professionals.

    The Home Depot CFO also has a theory about why they are doing so well. “There have been 3.6 million single-family homes added to the rental stock between 2006 and 2013,” she said during an earnings call yesterday. As the economy improves, home buyers will acquire some of those houses—and may have to make up for years of neglect by landlords and tenants. “As those homes are moving out of rental and to home ownership," she said, "they badly need remodel.”

    The CFO is putting her money where her mouth is as Home Depot also announced an $18 billion stock buyback program last month, to replace a $17 billion plan launched in 2013. The buyback flexibility should provide support to their EPS targets. Over the past three years, HD has traded at a forward multiple ranging from 16x to 25x and averaging around 20x. It’s multiple is now cycling up to the mid-20’s, due to the aforementioned financial engineering going on.

    Look…February sales are going to be affected because the Northeast has been buried by snow, but don’t worry these sales will bounce back in spades in March. Late last year, Home Depot for the first time saw Black Friday become its biggest sales day in history. Black Friday, or the day after Thanksgiving, generated close to half a billion in sales. It's offered promotions on gift items including power tools, holiday lights and ornaments. This is going to be a killer trend for them in years ahead. They already dominate in the second quarter every year. Like I said, favorable demographic trends, such as aging of houses and low interest rates, should help support home remodeling efforts.

    So let’s look at the numbers. ANAL-ysts predict earnings of $5.23 per share on sales of $86.8 billion. That’s really preposterous. $$$MR. MARKET$$$ knows that HD is going to bank $90.5 billion in sales which, combined with their stock repurchase plan and using existing operating margin growth rate, will generate earnings of $5.53/share. If you take these earnings and multiply it by the PE ratio of 24.3, you get a stock price of :

    $5.53 x 24.3 = $134.38

    Which exceeds my target price. So there you go…another winner.

    Here’s what the CEO had to say about his company:

    “Sales for the fourth quarter were $19.2 billion, up 8.3% from last year. Comp sales were positive 7.9% and our diluted earnings per share were $1.05. Our US stores had a positive comp of 8.9%. We finished the year strong with our largest quarterly sales growth for the year in the fourth quarter.

    We continue to see broad-based growth across the store and our geographies. Or and all 19 US regions some mid-single digit comp growth or better in the fourth quarter. Our sales were aided by a strong response to our holiday decor, gift center as well as our Black Friday events during the quarter. Our online channel also had a strong performance over the cyber week period with record traffic and orders while at the same time online customer service scores improved.

    For the year are online business group over $1 billion a growth rate of over 36%. Almost 40% all the online orders were picked up in the store a testament to the interconnectedness customers desire for our business.

    Looking at the full-year of 2014, we achieved our highest retail sales in Company history and through driving productivity and expense control we also reach the highest net earnings in Company history. Adding over $4 billion in sales and a most $1 billion in net earnings requires flexibility and coordination on multiple fronts and our associates and suppliers were able to respond effectively.
    For 2015, we believe overall GDP growth and continued tailwind from housing recovery will be the principal drivers of growth for our business. Consensus 2015 GDP growth forecast calls for moderate growth and most housing data points towards a continued moderate recovery in the US housing market. Based on this outlook we expect, growth in the US of approximately 4.5%.
    In 2013 we set out long-term financial targets to achieve a 13% operating margin and a 27% return on invested capital by the end of fiscal 2015. Our guidance implies that we will accomplish these goals. We will continue to drive growth and productivity in the business in 2015 and beyond.

    Finally today our board announced a 26% increase in our quarterly dividend to $0.59 per share. The board also authorized a new share repurchase program of $18 billion. We remain committed to maintaining a disciplined capital allocation strategy to create value for our shareholders. We will invest to sustain and grow our business and return excess cash to our shareholders through dividends and share repurchases.”
    I don’t need a hammer and a nail to build a winning stock pick. A cold beer and a computer will do, but with all of the money I make on this stock pick, I may just want to take a joy ride to Home Depot and fill up the trunk of my car with more stuff that I don’t know how to use.

    $$$MR. MARKET$$$ is a proprietary investor and does not provide individual financial advice. The stocks mentioned on this forum do not represent individual buy or sell recommendations and should not be viewed as such. Individual investors should consider speaking with a professional investment adviser before making any investment decisions.

    I am HUGE!

    $$$MR. MARKET$$$
    Last edited by mrmarket; 03-28-2015 at 12:01 AM.
    =============================

    I am HUGE! Bring me your finest meats and cheeses.

    - $$$MR. MARKET$$$

  2. #2
    investorone Guest

    Default

    Darn-I am disappointed with this one! Good write-up as always but do an overlay of the charts, and KR has a better YTD, 1 year, 2 year, 3 month, 6 month chart than does HD, MM, so I would love to know why and how HD beat KR???---also, you can buy meats and cheese at KR!
    Last edited by investorone; 03-07-2015 at 03:08 PM.

  3. #3
    Join Date
    Oct 2013
    Posts
    3

    Default

    Mr Market;
    Won't it be better to wait for HD to pb to the $113.20 area before nibbling? That fills a gap-up from Feb 24th.
    fwiw

  4. #4
    Join Date
    Oct 2003
    Location
    Hamilton MA
    Posts
    2,107

    Default

    A fine pick and a fine write-up, L.P. Plus I'm given to understand a lot of important male bonding takes place at places like HD and LOW.

  5. #5
    Join Date
    Sep 2003
    Location
    Akron, OH
    Posts
    1,667

    Default

    Quote Originally Posted by hyarima View Post
    Mr Market;
    Won't it be better to wait for HD to pb to the $113.20 area before nibbling? That fills a gap-up from Feb 24th.
    fwiw
    Not sure what this means :"...wait for HD to pb ..."
    Tim -Retired Problem Solver

  6. #6

    Default

    Quote Originally Posted by hyarima View Post
    Mr Market;
    Won't it be better to wait for HD to pb to the $113.20 area before nibbling? That fills a gap-up from Feb 24th.
    fwiw
    I',m going to sell it for a 15% gain. What difference does it make what I pay for it?
    =============================

    I am HUGE! Bring me your finest meats and cheeses.

    - $$$MR. MARKET$$$

  7. #7
    Join Date
    Sep 2003
    Posts
    4,637

    Default

    Quote Originally Posted by mimo_100 View Post
    Not sure what this means :"...wait for HD to pb ..."
    I believe that by 'pb' he means 'pull-back'...
    and if you wait for the 'pb' you'll likely wind up with the pb&j on this one, rather than the meats and cheese, if ya know what I mean.

    I'll be buyin' in on Monday, whether it's at 114 or 116.

  8. #8

    Default

    Quote Originally Posted by mrmarket View Post
    I',m going to sell it for a 15% gain. What difference does it make what I pay for it?
    That's just brilliant. This should be made into a plaque and hung on the wall behind all traders' monitors

  9. #9
    Join Date
    Oct 2003
    Location
    Hamilton MA
    Posts
    2,107

    Default

    Quote Originally Posted by hyarima View Post
    Mr Market;
    Won't it be better to wait for HD to pb to the $113.20 area before nibbling? That fills a gap-up from Feb 24th.
    fwiw
    Do it. Start your own thread and make some trades and show us the results. Seriously.

  10. #10

    Default

    Quote Originally Posted by Vixtt View Post
    That's just brilliant. This should be made into a plaque and hung on the wall behind all traders' monitors
    They've already built me a temple.
    =============================

    I am HUGE! Bring me your finest meats and cheeses.

    - $$$MR. MARKET$$$

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