Home Depot (HD)

It has been pretty flat over the last year. They have a very good market position. She gets repair and remodeling exposure through other companies. The average home gets $3500 spent on it when it changes hands, according to HD-N. Changing family formations with millennials leaving home to get their own are still a benefit to HD-N. It looks more interesting now than it has in the past.

(A Top Pick Feb 9/16. Up 21.74%.) This is really a play on the US economy, US GDP growth, employment growth, etc. They are all trending up and are reasonably healthy. As housing starts and turnovers improve, that will promote housing renovations and repair. About two thirds of US housing is over 30 years old, which means more repair and renovations. Good dividend yield of 2.1% and always increase it every year.

(A Top Pick Jan 12/16. Up 9.19%.) She prefers this over others, because they have higher margins and are executing better. This is really a play on improving employment, improving GDP growth and higher housing. Housing turnover is a very important metric. When someone buys a house, they usually want to do some work on it. They’ve been seeing very good same-store sales growth. Online is only about 5% of their revenues, but it is growing. Online commerce is not a potential threat for them.

A very well run company, but you are paying quite a bit for it. It can take quite a while to grow into it. We are a number of years into the housing turnaround.

A great company, but also a $160 billion company trading at 18.5X forward earnings, which is a premium to the market. The fact that it is a great company is reflected in the stock. The US housing market has recovered. It is now at 1.3 million home starts on an annualized basis. On a normalized basis based on the last 40 years, you’ve had about 1.3-1.5 million starts, so you are back to where US housing should be. This will be a beneficiary of that, but the market already reflects that. It is hard to grow a $160 billion retail company, and paying a premium to the market is challenging. If you don’t own it, he would look elsewhere.

He is very bullish on the reno cycle. If tariffs get slapped on imports from China it will have a negative impact on this stock.

Reported this morning with strong numbers and a strong quarter, but the stock was off a couple of dollars. Higher interest rates may mean higher mortgage rates with increased borrowing costs. However, the Company made some good points. They looked at the affordability Index, which is currently above 150. An average median household can buy a medium-priced home at an 80% mortgage, and as the rate goes up, it is more positive. Employment growth is strong, consumer confidence is strong and the economy is growing. All of these things work in their favour. (Analysts’ price target is $148.80.)

Home Depot (HD-N) or Lowe’s (LOW-N)? Home Depot is about 3 to 4 times the size of Lowe’s, and their store count dwarfs Lowes. This is down about 6%-7% this year where Lowe’s is having a better time of it. However, going back 5 years, Home Depot has been a better, smoother experience. This is a tough call, but knows that Home Depot’s footprint is a bit higher.

(Home Depot (HD-N) or Starbucks (SBUX-Q) for a long-term US dividend growth stock?) The market has taken 10%-15% off both names this year. He likes and owns both. If you can do it in your portfolio, you might want to buy half of each. The US consumer is still very healthy. Household formations have continued to grow at about 1 million a year, and he likes this stock based on the fact that there continues to be home sales increases in the US. Both are dividend growers. (Also see Top Picks.)

Well-run and has a good balance sheet. You are playing a housing market recovery. Thinks earnings on this is going to increase by about 4%-5%, and you are paying a pretty hefty multiple for that. It has an okay dividend.

Home Depot (HD-N) or Lowe’s (LOW-N)? On a purely statistical basis and EPS growth, Lowes is the better company. However, standing back and looking at the corporate culture and corporate philosophy, he prefers this one.

Dividend growth strategy? She agrees with buying this if you want dividend growth. They continue to build and grow their top and bottom line. The 100-pound gorilla in their arena. You have to be very careful about the methodology of dividend growth. It is not necessarily about buying utilities, which seem very appealing. But they’ve been bid up by everybody looking for dividend yield. You are much better off buying oddball things like Texas Roadhouse (TXRH-Q). Be careful of telecommunication companies, because they will be squeezed. A good dividend yielding stock that is off the radar is Domtar (UFS-N). (See Top Picks.)

A bet on the millennials and the demographics. These are great operators. As the millennials mature in, they are going to have to buy homes, and there is going to be a lot of demand come into this company. Dividend yield of 2.18%.

(A Top Pick Sept 9/15. Up 12.56%.) Her target price is about $20 higher than the current price. The company is posting really strong results. This is a play on the whole improvement in US employment, housing starts, household formation and improving sentiment.

Likes this stock, because it is playing in an important theme, the US housing recovery. It is becoming a bit expensive, but if they keep beating expectations because of the favourable trend in the housing market, it is still a decent stock to own at this point.