Comparing Home Depot And Lowe’s
I’ve noticed something really interesting in the market. It’s been happening over the last month. What I’m seeing is a divergence in stock performance. Yes, the markets have been horrible. As a matter of fact, you’d be hard pressed to find more than a handful of stocks doing really well.
What I’ve noticed is on a relative performance basis, some companies are performing better than others.
Now I see you shaking your head. Relative performance, what do I mean by that?
Let me give you an example…
Back in December I wrote an article about a stock I was buying for my account. I saw this investment as a really long term hold. I jumped in with the expectation that I’d hold this investment for 10 or 20 years. It’s really a long term buy and hold mentality. I picked this company because I thought it was best of breed… and I was right.
My thoughts have been confirmed over the last month… but more on that in a moment.
With my investment, I was able to capture a nice dividend yield of 3.6%… more than double the five year average of 1.3%. Of the 19 analysts who covered the company, only 6 rated it a “buy”. This was positive in my mind. When analysts start upgrading the company, I’m sure the stock will jump in value.
Analysts had been cutting back on growth estimates. It was expected given the economic environment. That being said, the company wasn’t exactly struggling.
When I invested they had just posted earnings for the first nine months. They did $56.6 billion in sales and generated more than $4.0 billion in operating income. Best of all they had profits of more than $2.3 billion.
So who was the company?
It was Home Depot (HD) the big box retail store you’d find in almost every city in America.
So back to relative performance…
As I was monitoring my Home Depot investment, I noticed the stock was outperforming their next biggest competitor Lowe’s (LOW). This outperformance wasn’t a small blip. I’m talking a significant change in stock price over the last month or so.
Category: Stocks
