John O'Connell, CFA Home Depot HD-N BUY Jun 10, 2021

Owns it because interest rates are coming down by year's end and there's a 5-year super cycle.

They report Tuesday. HD isn't levered to interest rates, but rather repair and renovation trends, which is a tailwind. Is -2% for the year, well off its highs, but he likes this long term. Also, HD has the scale to absorb the tariffs on their foreign-made goods.

When interest rates stay stable this will be fine. Also gardening season is coming along. However, people look at the weak housing starts and don't buy HD. Don't be constrained by that.

Likes it, but is hard to own due to a lousy housing market and weak gardening season. Hold your nose to buy it.

Covid saw overspending by consumers, then underspending, now normalizing. Rising interest rates have affected lower-income US households, and that's showing up in HD traffic numbers. In US, over 50% of homes are over 40 years old; long-term secular trend to repair and modernize. 

He bought more around $359 to replace shares he called away. Rates are still high, so there is still a long-term recovery happening.

Cheaper than it's been, probably still a good long-term buy. Dominant market position, and ultimately housing will come back. But housing's in a slowdown, US consumer will go through some difficulties from tariff risk and higher mortgage rates. He has nothing in retail/consumer right now.

Expanding ability to get a larger part of the addressable market via acquisitions and maintenance/repair opportunities. Going after the pro segment. Getting better at digital commerce. Missed street expectations, but 12/16 categories showed strength.

They just reported revenues a little light and EPS also missed, basically was flat YOY, but the quarter was still good.  The misses were partly based on poor weather last quarter (a wet spring). Same-stores sales over the quarter locked flat, but was +3.1% in July after two flat months. Management is confident in its distribution centres and reiterated its full-year forecast. If interest rates fall (looking likely), it will only help the housing and home improvement market. The tariff hit will be minimized because many HD products are made in the US.

Trump tariffs will cause a decline in consumer spending. This is why Trump is pressing the Fed to cut interest rates to boost consumer spending. Lower rates will help anything connected to a home equity loan--therefore HD. This is why HD is rallying despite tariff pressure