Rob Sechan, Managing Partner, New Edge Capital Home Depot HD-N BUY Sep 01, 2023

This and Lowe's are quality businesses that he's long owned. Healthy profits and capital efficiency. They will benefit if interest rates decline. Be patient.

Still buying here. Purchase of SRS broadens its addressable market further. Getting better at e-commerce. Pursuing repair and maintenance segment.

It's a long-term monster he's owned forever. Remains profitable with capital efficiency. Ultimately, it needs to benefit from a home recovery and improvement spend, and that needs lower interest rates. He's patient.

Housing has a long way to go, but was up in Q4. She will take any improvement. They have very easy comps. 

It reports Tuesday. He expects a soft quarter from weak housing, but HD will benefit from the rebuilding from the south-eastern US and the L.A. fires.

Interest rates cuts are stalling, so shares are -7.74% the past month; housing turnover and the weather have been bad. Tool sales are down. It reports tomorrow, but he will buy after that report. He has faith, because when the street was shorting this in 2008's housing crisis, HD gained market share and bought back a ton of shares.

He wouldn't buy at this point, consumer is still very weak. YOY organic growth is negative. Still trades at a fairly hefty premium compared to the market and to its own historical levels. He'd wait till consumer and housing are stronger.

Last September, he sold and took profits. Shares are trading ~24x forward PE, for 5% EPS growth. Valuation's expensive. EPS growth rate expectations have come down. Cautious spending by consumers, stock's slipped below 200-day MA. Long-term inflation is dampening the DIYers, sluggish home sales. A name to own early economic cycle, and we're about mid-way through now.

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.