Breakout

Time to get constructive on these retail stocks

Jeff Macke
Breakout

Shares of Lowe’s (LOW) and Home Depot (HD) have been locked at the hip for the last two years as the companies ride the wave of a housing recovery that doesn’t seem to want to quit. In the attached clip author, retail expert and new apartment owner Hitha Prabhakar says there’s more room to run on the 90% two year rally in home retail.

Home Depot has scored 6% and 11% gains for the last two quarters. For investors in the retail space that’s a bit of a mixed blessing. While HD has been a killer for one of the biggest retailers in the country, it’s going to be hard to outperform both Walmart (WMT) by such an extreme amount, particularly with evidence that housing price increases are starting to slow.

Prabhakar says Home Depot isn’t just about door-knockers and nails, the company is getting better at offering seasonal goods. Because they aren’t encumbered by Walmart and Target’s (TGT) mandate to carry everything from frozen yogurt to underwear the way mass merchants are, it’s easier for Home Depot and Lowe’s to move in and out of seasonal goods on a rolling basis. That means a broader selection of Christmas trees in the winter and posies in April.

The retail guru insists the stocks have more room to run. Home Depot’s focus on the consumer gives them an edge over other big box hardware competitors and the housing recovery, slow though it may be, continues to give the company a tail-wind. For those looking to put together a shopping list as stocks slump at the start of the new year, Prabhakar says Home Depot is the way to go.

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