Best Stocks for 2008: Value shopping at Home Depot (HD)

Posted Dec 20th 2007 2:12PM by Steven Halpern
Filed under: Home Depot (HD), Newsletters, Stocks to Buy, Housing, Best Stocks for 2008

For 25 years, Steven Halpern, editor of TheStockAdvisors.com, has surveyed the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is one of 100+ ideas in the Best Stocks for 2008 report.

"Our favorite conservative pick for 2008 is Home Depot (NYSE: HD)," says Daniel Frishberg, editor of The MoneyMan Report and host of BizRadio.

"This is a stock that has been beaten down due to the weak housing market. We believe, based on the fact that it owns most of the real estate its stores sit on and these are typically in the best areas of town, that it's undervalued.

"With new management in there and a housing market that will stabilize, home improvement will do very well over the next several years. Home Depot typically trades at 14X cash flow since 1995. Based on that one parameter, the stock could be a double over the next couple of years.

"The company's balance sheet is in excellent shape at this point. We believe most of the bad news is priced in and with a Fed that will continue to cut interest rates, Home Depot will be an economically sensitive stock that will benefit. In our view, this is a 2-3 year hold.

"In addition, management recently announced it would be buying back about 1/3 of its outstanding shares. Return on equity has consistently been over 20% and is accelerating. Home Depot's price/sales is .68 and its PEG ratio is just about 1. Gross margins are consistently above 30%.

"Their P/E ratio in the late 1990s was around 45 and is now sitting at around 14. All the bad news that's been around the company with slowing same store sales, bad management, and a bad housing market is priced in, we believe. In addition to all this, you get a reasonable 3% dividend going forward. We like the stock right now and do own it."

Tags: best stocks 2008, bizradio, construction stocks, daniel frishberg, DanielFrishberg, featured, hd, home depot, home improvement stocks, housing stocks, moneyman report, real estate stocks, retail stocks, steven halpern, thestockadvisors.com, top stocks 2008

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Reader Comments (Page 1 of 1)

12-21-2007 @ 4:57AM

Stavros Georgiadis said...

Besides all the fundamental analysis a thorough look at technical analysis combining daily and weekly charts would be great to support the long term buy and hold of this stock.
Lets combine both worlds,fundamental and technical to support our opinion.
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