Home Depot Overpunished For Talking About Earnings Decline

Reduction in earnings expectations? Stocks drops. I bought using a limit order I put in last month at $39.45.

I think Home Depot (HD) is getting overpunished for talking about an earnings decline of 4-9%. Even with the new guidance, I'm still buying the stock at a reasonable p/e ratio. Also, revenues are still expected to be up 2%.

My rationale for buying Home Depot at year end 2006 is still intact:

1. So much room for improvement in stores which currently look like hell.

2. New CEO has to prove himself and will work hard to correct the mistakes of the last (overpaid) one.

3. Home Prices declining will mean that people will do home fix-up projects instead of selling.

4. After a fight with RAN (Rainforest Action Network) that ended in 1999, Home Depot pledged to not sell wood from endangered forests.

My opinion from Jan 2007

Home Depot was one of my Year End Buys.

Disclosures and Confessions: I own Home Depot (HD). I started buying it at year end and though I do not have a large position I am slowly accumulating it. I shop at Home Depot and am disapointed as to the state of the stores. Customer service is terrible as I watched Grandma fight with them to take back a washing machine that didn't work. (Grandma does not own HD.)

HD 1-yr chart: