Mark Sellers' Prescient Call on Home Depot

Mark Sellers is a Chicago-based hedge fund manager with a respectable record. He's also a columnist for the Financial Times. In a prescient column dated September 8, 2006, Sellers suggested Home Depot launch a massive share buyback.

In that article he said, "I believe Home Depot should offer to repurchase 25 per cent of its outstanding stock in a tender offer, using debt to finance the transaction." Sellers argued that Home Depot's stock, then at $34, was worth at least $50. He saw a rare and short-lived opportunity for management to create shareholder value through $17 billion in share repurchases which he compared to a "mini-leveraged buy-out."

On June 19, 2007, nine months after Sellers' article. Home Depot announced that it would sell its HD Supply unit for $10.3 billion and use the proceeds plus its cash and an additional $12 billion in new debt to finance $22.5 billion in share buybacks.

Sellers wrote, "If the markets won't give Home Depot the valuation it deserves, management owes it to the shareholders to do something." Mark, you got your wish.

Disclosure: The author is long HD.