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Lowe's posted Q1 results that were 'less worse than feared,' hence a Buy rating has been generated here, but there are qualifiers, so pay attention.In Q1, Lowe's (NYSE: LOW) said it saw some saw some strength in its outdoor projects unit, which includes seasonal equipment like lawn and garden supplies for spring / summer, even as homeowners continued to cutback on major home renovations.
Further Lowe's increased its F2009 EPS guidance to $1.13-1.25 from earlier guidance of $1.04-1.20. The First Call F2010 / F2011 EPS estimates for LOW are $1.15 / $1.31.
Is the higher guidance enough to announce that the U.S. recession has bottomed? Hardly, but it does suggest the home improvement segment - which is at or near lows in many categories - has just about reached a nadir, institutional investors sense this, and hence will start to add incrementally to their LOW positions.
That's enough to generate the Buy rating, but given the U.S.'s high unemployment rate and its impact on household formation, it's best to wait until Lowe's stock closes above $20 for three straight sessions before buying shares. If LOW closes above $20 on Tuesday, May 19, that would mark its second straight day above $20. A tight Stop has also been deployed to guard against a retrenchment in shares, due to a potential delay in the U.S. economic recovery.
Stock Analysis: Lowe's is a high-risk stock. Consider buying a 25% position in LOW only after it closes above $20 for three consecutive days; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your LOW position in the first half of 2009. Sell / Stop Loss if you were to buy shares in this company: $14.
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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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Reader Comments (Page 1 of 1)
5-22-2009 @ 1:36PM
JohnMD said...
The guy who wrote this article amazes me with his complete lack of insight as to how to play the market. Why in the world is someone who neither owns nor trades stocks giving advice on how to do so?
The way to make money in the stock market is to buy low and sell high. The way to LOSE MONEY is to "to wait until Lowe's stock closes above $20 for three straight sessions..." Such advice is absurd, unless it is day trading momentum play, which you would buy and sell either the same day or the next day. And, if you are going to do that, the overall market conditions will be much more important than the earnings on the particular stock you are buying, yet this author emphasizes the fundamentals involving Lowes! On top of that, the author is talking about long term accumulation of Lowes with a stop loss order at $14! That is absurd for a value investor, interested in fundamentals.
A value investor buys when he sees a fundamentally good stock that is undervalued, not at a time when it is overvalued. He does not try to day trade, or place "stop loss" orders on a long term value investment.
As Warren Buffet once said "When the shares of a company I like is going down, I see it as a positive, so long as I continue to have money to invest, because it means that I can buy more shares for the same money."
That is the essence of value investor. This author doesn't know what he is talking about, and BloggingStocks should cease publishing his articles because his lack of knowledge is likely to mislead other inexperienced investors, like himself, into losing huge sums of money.