DCF Conclusion Study on Home Depot (HD)

We continue to build out our edge to understand the Dow

Hi Everyone,

I am continuing my DCF Conclusion Studies on Dow Jones Index names to keep building out an edge in understanding the index’s trading parameters. Today we discuss Home Depot (HD).

Yesterday, I released a note on Salesforce (CRM) after its post-earnings stock selloff. I have pursued the transactions I have discussed in the CRM DCF Conclusion Study in my 401K. I do believe that given a reasonable timeline, our Strategy will reward us - one way or the other.

As of now, I believe CRM is Fairly Valued. Not undervalued. Not overvalued.

In this email, I’m going to keep building out my library of DCF Conclusion Studies. In a couple weeks, Members will have a nice neat table of Bear/Base/Bull cases for the top Dow names to help them understand where the Dow trades in terms of risk/reward. So far, we have completed United Health (UNH) and SalesForce (CRM). And now, we have Home Depot (HD).

The top 10 stocks in the Dow contribute over 50% of the index weight.

This means that understanding the trading parameters of these 10 names will indirectly give you insight into when the Dow is approaching an accumulation region or a risk-reduction region.

Using DCF Conclusions of Key Companies within the Index is my unique methodology to understand SPY ETF (Futures: ES), QQQ ETF (Futures: NQ) and DIA ETF (Futures: YM).

Even though the Dow has seen quite some selling pressure, at certain key levels, I believe it will be bought back up for a pleasant counter-trend rally.

My DCF Conclusion Studies on the Key Companies will help us in attempting to find such regions.

Home Depot DCF Discussion/Context

Similar to many Dow names in 2024 that have a consumer-facing business, Home Depot is seeing a modest setback this year after seeing a large bull run since October 2023.

HD recently reported earnings and the key takeaway is that consumers are spending less on big ticket items and that there is a more cautious purchasing psychology that is happening across their stores.

With this type of macro narrative in hand, I think enthusiasm has to be kept in check, and risk/reward on HD is roughly 1:1 at the moment (discussed more below).