Home Depot: waiting for the housing cycle
Comparable sales have been flat to down for two years because nobody moves house when mortgage rates are high. That cycle turns eventually, and Home Depot is the cleanest way to own the turn. The question is timing, and I don't try to guess it.
Sample research report used to test the layout. Delete before launch.
Thesis
A best-in-class retailer in a cyclical trough. The business is not the problem; the housing market is. When existing-home sales recover, comparable sales follow within a couple of quarters.
Catalysts
- Mortgage rates falling enough to unlock housing turnover.
- The professional contractor business, which has been growing through the downturn.
Risks
- Rates staying high longer than anyone expects, again.
- Consumers deferring large projects indefinitely.
What would prove me wrong
Comparable sales staying negative even as housing turnover recovers. That would mean share loss, not the cycle.
Position
None yet. Buying when existing-home sales show two consecutive months of growth.