Lowe's (NYSE: LOW) has broken through resistance at $20, hence I'm issuing a Buy rating for the company's shares. . Lowe's has posted two consecutive less-worse-than-expected quarters, and the calculation here argues home improvement revenue will improve in the next year, and more broadly, the U.S. housing sector has bottomed, providing another modest tailwind. Lowe's also reported stabilizing customer traffic in Q2.
Technically, Lowe's chart is good, but not great, but one can make the case that institutional investors are incrementally adding to positions - but probably with tight Sell/Stop Losses: and that's the tack that will be followed here, as well. The First Call FY2010/FY2011 EPS estimates for LOW are $1.20 to $1.34.
Stock Analysis: Lowe's is a high-risk stock. Consider buying a 25% position in LOW now; 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 before December 2009. Sell/Stop Loss if you were to buy shares in this company: $14.50.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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