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Home Depot: Macro Uncertainties Make It An Uncomfortable Stock To Own

May 20, 2023 4:07 AM ETThe Home Depot, Inc. (HD)12 Comments
Vinay Utham profile picture
Vinay Utham


  • Home Depot had a subdued first quarter, with year-over-year declines seen in both revenues and EPS.
  • The company's dividend yield looks attractive, and the resilience shown by the U.S. consumer bodes well for the long-term.
  • However, due to the current macroeconomic climate and company valuation, investors should adopt a wait-and-watch approach.

Orange Home Depot Sign


Investment Thesis

Home Depot (NYSE:HD) had a poor quarter and the management's guidance for FY23 wasn't rosy either, in my opinion. In this article, I argue why, despite having some strong catalysts for long-term growth, the current macroeconomic climate together with its valuation

This article was written by

Vinay Utham profile picture
Assistant Professor in Finance and Corporate Governance at Brunel University London and a CFA Level 3 Candidate. I hold a PhD in Finance from University of Durham, U.K. I have more than 5 years of investing experience in the Indian and US equities with a medium to long-term horizon. I also actively research on activist hedge funds and M&A and have published in top-ranked peer-reviewed journals. Recently, I have ventured into the world of podcasts and currently produce and host a weekly investing podcast, 'The Stock Doctor.'

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (12)

HD has been a beneficiary from the cash out refi boom that has taken place in recent years. Refi activity is now rolling over - hard. I expect HD’s revs to follow. Avoid
OverTheHorizon profile picture

Refi rates +7%:

“The 15-year refi average moved a bit more dramatically than its new purchase counterpart, jumping 11 basis points, while the jumbo 30-year refi average marched in place. Tuesday's gap between 30-year new purchase and refi rates was 27 basis points for a third consecutive day.L
First couple of lines: from “poor quarter” to “a subdued first quarter.” Make up your mind. They are not the same. You buy a stock not because of a relatively weak quarter, which is all relative, but for long term potential. That being said, this might be a good entry point for the company. I mean if you are a true investor then you would look at it like this.
Went to our local hardware store yesterday for a lawn mower battery and 3 propane bottles. They didn’t carry either. No other stores around, had to go to HD another 10 mins out. Spent $100 on just that. Last year it would’ve been maybe $70. Transaction #’s maybe down, but prices are wayyyy up to compensate. I expect transaction #’s to be up again by the spring. Hoping to see <$280 before then to add more to my top 5 position.
OverTheHorizon profile picture
Home sales continue to plunge. Existing homeowners not selling— or investing in major (+ $5k) renovations given uncertain economy (ie cash is king; especially for retired Boomers):

“Southern California home sales take 46% dip to historic low: 5 reasons why
46% dip was 3rd biggest, year-over-year drop in records dating to 1988”
I think hd is a pillar of the US economy. I watched this company for years and is a good company. On the same token i have COST. That been said i agree partially with the author as the macro environment is tricky for the next 6 months. My strategy is sell puts for September at a much lower price and if u get hit take the shares. If not reevaluate and do it again.
My strike price is 180 for September and i was paid well enough to wait and watch.
Remember the market is forward looking. A lot of what the author says is well known. It’s a matter of timing with quality that exhibits some cyclicality. The bottom May be closer than you think
Well managed company and best of breed HD, should be a core holding in any portfolio.
I’m reading more and more lately about the need for renovations on a high percentage of US homes. As the boomer population ages so many homes are outdated and in need of considerable work. The demand will continue to rise not lessen here. Economic factors may slow this down in this specific cycle but long term I’m holding my shares. With the shortage of new homes and people moving around less with these interest rates it will make economic sense for people to invest in their properties. I wouldn’t bet against HD
Couldn't disagree more. Majority of citizens live in homes. Homes of all types and sizes tend to need updating, repair and maintenance. Where there aren't homes, there is land. Homes are built on land. Unless you're planning to go and live in a cave, homes are the No. 1 choice of habitation. HD is an own and forget it stock.
@rocketman3 Very happy HD owner since 1986 ,very many stk splits!
birder profile picture
Not for me, it doesn't. I think it is a good long term investment and I have been buying.
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