Jim Cramer on Microsoft and Other Stocks

2. The Home Depot, Inc. (NYSE:HD)

Cramer talked about how The Home Depot, Inc. (NYSE:HD) reported results that surpassed most expectations yet its stock came down because of the bond market.

“Consider the stock of Home Depot. The despot reported better-than-expected revenues, earnings, and same-store sales. They came out at 6:00 AM, stock quickly jumped from $408 and changed to $420. That’s in that market, the Wild West market. But then the bond market intruded, bringing the stock all the way down to $403. Now, it didn’t help that management made some comments on the conference call about how well Home Depot can do when mortgage rates fall to 6%. Any close listener would realize that, with long rates on the rise, again, the opposite will happen. Plus, heaven forbid, we get a hot consumer price index number tomorrow because the one thing saving us from the bond market is the Federal Reserve. But the Fed can’t keep cutting rates if inflation picks up, right?

The Fed controls short rates, which tend to align themselves with home equity loans, vital to Home Depot’s rehab and renovation business. Still, I like this company and we told investing club members that we’d be buyers of Home Depot and we don’t think the negativity’s justified. We grabbed someone in the trust in the morning because we thought the results were just too good to ignore. To me, Home Depot is the single best stock to buy when the Fed’s cutting rates.

I think we got a gift when the stock took a header off today’s bond market action. Once the despot earnings get moving, it tends to really fly and today’s earnings show the momentum is now with the Home Depot bulls like me even if the stock only fell five points to $403 where it was right after the mortgage comment was made. If this gets below $400, I say buy, buy, buy.”

Home Depot (NYSE:HD) is a leading and widely recognized retailer in the home improvement industry. We discussed the company’s third-quarter results in our article, 10 Stocks on Jim Cramer’s Radar.

During its third-quarter conference call, Home Depot (NYSE:HD) management discussed how the current high interest rate environment is putting pressure on larger, typically debt-financed remodeling projects, as well as existing home sales. They noted that since the rate cut in September, mortgage rates have risen by approximately 60 basis points. This increase continues to affect housing turnover, which has fallen to just around 3%—the lowest level in 40 years. Management also suggested that while conditions are tough, they believe the worst may now be behind them.