Jason Del VicarioHome DepotHDBUYOct 06, 2020

Both new home construction and renovation are suffering. Mortgage rates are high, population growth has stalled, immigration laws have increased labour costs. Relatively demanding multiple, but not really any growth. 

Wait to see green shoots of improving consumer confidence and of new/renovated home activity before entering the space.

Is down 17% this year and at 52-week lows from a miserable housing market and rising rates.

Given interest rates, you have to hold on for the long term. Their numbers were good, beating his expectations. The professionals side was fantastic. They did not lower their guidance. But the valuation is much higher than peers like Home Depot.

Lowe's is -11% vs. Home Depot's flat. HD has integrated its new properties better than Lowe's. He see more earnings growth from HD from M&A.

Is down 15% this year. It yields 3% though. Trades at only 20x PE and we're in spring selling season.

They report Tuesday. It's been a huge bust, with shares are going down and down because of the spike in interest rates. He doesn't expect anything food from the quarter this time, but if the quarter isn't terrible there's a chance of a rally.

Is getting punished because doubts there will be an interest rate cut because inflation is climbing due to the US-Iran war. Is -9.5% this year.

Solidly in consumer discretionary, which explains its fall. Very interest-rate sensitive -- rates didn't go down as much as expected, plus Iran war caused jump in inflation. People defer renovations because they're often funded with loans. Its earnings recovery is deferred, not aborted.

They hit a two-year low yesterday. It's a terrible time for housing. This needs a couple of consistent interest rate cuts to go anywhere.

It yields 3%. Down 2.41% today and hit a 52-week low. Very disappointing. He needs to see lower mortgage rates and the ICE raids are a problem.  He hasn't given up on this, but it's hard to own.

He got stopped out yesterday, losing 10% of his holding. He still likes it. Mortgage rates need to get below 10%.

It's a show-me sector, related to the consumer and gas prices. Before the oil shock, HD was still a show-me story with little growth and trading at a high PE.

Dominant home improvement retailer in US. Its edge is being a one-stop shop for complex, multi-trade projects. Taking share from both LOW and specialty suppliers. Expanded into roofing, building products, and repair/maintenance. Stepped up e-commerce.

13% compound pace of dividend increases over last decade. Lagged effect of interest rate increases in US likely to shore up housing this year and bolster earnings. Yield is 2.50%.

Is a major holding. There will be more interest rate cuts. HD is a great way to play the turnaround in housing to come.

The low-end consumer is challenged due to high prices and inflation since Covid. Also, it's a cyclical stock. Wait for better certainty.