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From January 1, 1990 to September 11, 2019, Home Depot returned roughly 19,542% versus the S&P 500 return of roughly 749%. That’s roughly 26x the return of “the market”. Household formation & home improvement is a very important theme in America.
— Source: Stockcharts.com

COMPANY PROFILE

The Home Depot is the world’s largest home improvement retailer with nearly 400,000 orange-blooded associates and more than 2,291 stores in the U.S., Canada and Mexico. The typical store today averages 105,000 square feet of indoor retail space, interconnected with an e-commerce business that offers more than one million products for the DIY customer, professional contractors, and the industry’s largest installation business for the Do-It-For-Me customer. Every time I hear about the “death of retail”, I’m reminded of the continued success of Home Depot and others. HD is a staple of every American neighborhood and the build-out of communities and housing developments couldn’t happen with Home Depot.

 

Recent Earnings

The Home Depot®, the world's largest home improvement retailer, today reported sales of $30.8 billion for the second quarter of fiscal 2019, a 1.2 percent increase from the second quarter of fiscal 2018. Comparable sales for the second quarter of fiscal 2019 were positive 3.0 percent, and comparable sales in the U.S. were positive 3.1 percent. In the second quarter, the principal difference between the Company’ssales growth and comparable sales performance reflects a shift in the fiscal calendar base due to 53 weeks of sales in fiscal 2018. The Company expects its fiscal 2019 sales to grow by approximately 2.3 percent and comp sales for the comparable 52-week period to be up approximately 4.0 percent. 

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Opinion

From a factor scoring perspective versus the other 199 brands in the brands index, here’s where Home Depot scores well as of 9/17/19:

  • 89% strong price momentum

  • 86% high absolute free cash flow

  • 89% high absolute total sales

  • 98% high ROIC

  • 97% high ROIC over WACC (weighted cost of capital)

The stock has been a monster since its IPO in 1981. With Millennials just beginning the earning, saving and spending years, the housing sector and home improvements should continue to thrive. Investing in HD stock is not about rapid store growth anymore but it’s about the massive installed base of stores and consistent shopping by consumers, contractors and builders. HD benefits from so many trends it boggles the mind: new home construction, existing home improvements, rental improvements, trade supplies, etc. The stock is not cheap but it sure is stable and predictable and a key pillar of every community. A great dividend grower with solid same store sales growth. Buy it every chance you can, particularly on dips.