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Home Depot Is Still the Best Way to Play a Housing Recovery: Baker


Home Depot (HD) is powering higher today after reporting better than expected fourth quarter earnings results. In addition to the strong bottom line Home Depot raised guidance, increased its dividend by 34%, and announced a $17 billion share buyback plan. The news came on the heels of decent results from competitor Lowe's (LOW), which disappointed on margins yesterday and continues to struggle with a turnaround.

Lowe's woes aside, the home improvement business clearly isn't suffering. Simon Baker of Baker Ave Asset Management says the industry has been improving for the last 6 or 7 quarters. "What it's telling you is that the recovery is still very much intact," he states in the attached video.

Between Lowe's and Home Depot the plucky Englishman prefers to shop at the former, but invest in the latter. "Lowe's a little bit tired," he says, quickly adding some dating advice as a brief aside. "In terms of the financials of it Home Depot looks like a better place to go."

Baker is still slightly circumspect on the home building stocks and worried about the consumer in general. In his view the economy isn't strong enough to justify the explosive rally in the home building sector. The way to play ongoing improvement in the economy is via the king of housing supplies -Home Depot- and maybe even a taste of Wells Fargo (WFC) as a way to profit from mortgage generation.