Stock price when the opinion was issued
Right after they recently reported, sellers pulled the trigger before they heard the conference calls, which indicated the companies are doing well. These are good companies and those sellers deserved to lose money. HD announced that their inventory glut of 2023 is now over, that inventory fell 16% last quarter vs. the prior year. Therefore, quarters will improve going forward, especially in the key spring gardening seasoning when sales usually pick up. Also, HD boosted their dividend. As for Lowe's, the CEO announced that high-margin building materials was their best-performing segment, and they will launch a loyalty rewards program in the spring Further, bad weather impacted sales in January for both companies.
Owned HD 25 years ago. Took profits 10-12 years ago, and switched to LOW. Based on LOW successfully adopting the HD playbook to grow gross margins, and on valuation (LOW was 4 multiple points lower than HD). HD is now trading at a low 20s multiple, and LOW is about 17x.
Out of both right now. He became skittish on consumer. It's not they've been poor performers, but the new choices have rewarded clients to a better extent.
Great companies, great franchises. Always looking for an entry point, it's not yet. HD reported this morning, shy on revenue, mentioned consumer pulling back. He wouldn't be surprised to be in one or the other in the not-too-distant future.
He sold Home Depot to buy this, because it trades at a lower PE and they execute as well. Managers here used to run HD and apply the same playbook at Lowes. Operating margins in the last 10 years have almost doubled. He exited both stocks given higher PEs and weakening consumers. Would like to re-enter later.