All of the financial negatives in the news this past year were only magnified by CEO Robert Nardelli's poor showing at shareholder meetings. Nardelli's contempt for questions from the "owners," the press, analysts or anyone else who challenged him were further exacerbated by his obscene pay, which would be obscene in any year regardless of performance. While this does not give the market confidence, it is all a distraction that reduces the share price without reducing the company's value. It may surprise some that Home Depot actually increased overall sales, profits, shareholder equity and shareholder assets every year for the last five years despite all the problems. (Read the Company Profile).

The news has been filled with rumors that Home Depot may be acquired and/or taken private. This type of speculation is something I give no value, for it is truly pure speculation, so I ignore it. Just about everything I have mentioned here you may have heard about elsewhere. But there are two things I have not heard mention of that have me intrigued.

The first is that, despite all the growth, the stock price is now where it was almost eight years ago. Second, and even more curious to me, is that when a company lists the book value of real estate on its list of assets they are usually very out of date. Home Depot has over 2,000 stores. On its balance sheet from January 2006, it lists the value of Property, Plant and Equipment at over $31 billion, approaching three quarters of its assets. This figure does not separate real estate holdings from plant and equipment. That is something I would like to see. I do not think it would be a hard sell to convince you that this is grossly undervalued based on the appreciation of commercial real estate in the past ten years. Add the fact that it holds large parcels of land, which would be hard to aggregate in developed areas, and Home Depot could end up a massive real estate play. It is conceivable that properly valued, the real estate alone could add many billions of dollars to the share price.

Players in the leveraged buyout arena are prone to significantly increase debt shortly after their acquisitions close. If Home Depot has not leveraged its real estate, then the LBO players will be looking at this closely. I would, I am. So here you have a shunned company with a low P/S, low P/E, high yield, good ROE, ROA, ROIC, a stagnant share price, and tremendous assets. It has to be on your watchlist and, if it falls even a little, perhaps on your buy list. And for those who can't get Nardelli off their minds, CEO pay could be the first cash brought back to the bottom line.