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Home Depot & Lowes: Improve Your Home & Your Portfolio?

Christina Scolaro
Big Data Download

One might think that since it’s spring and it’s typically home-improvement season, it’s a good time to make a bet on shares of Home Depot or Lowe’s. Historically, those results are mixed this time of year. Investors may be better off looking at the housing market as an indicator of the strength of the companies. Both stocks are benefiting from an improving housing market.

In January, the S&P/Case-Shiller home price index was up more than 8 percent year over year. Home Depot and Lowe’s were also higher.

Analyst David Strasser of Janney Montgomery says that in addition to an improving housing market, the company with current market dominance wins. According to Strasser, Home Depot has the best real estate in the industry. It was the first retailer to open in 30 major cities. He estimates that 75 percent of the company’s profitability comes from stores that were opened before the year 2000. Lowe’s, on the other hand, started with small- and medium-sized stores in the Southeast, and it was only in the late 1990s that it started to shift to larger stores around the country.

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Here’s another thing to keep in mind when making your investment decision. The professional contractor loves HD! Thirty-five percent of Home Depot sales come from the pros, compared with 25 percent for Lowe’s. That’s a huge difference at the cash register. Whichever home improvement store you choose to shop at or invest in, one thing is for sure, the aisles are crowded because of improving sentiment in the housing market.