We recently published a list of Jim Cramer is Talking About These 10 Stocks Amid Global Selloff. Since Home Depot, Inc. (NYSE:HD) ranks 9th on the list, it deserves a deeper look.
Jim Cramer in his latest program on CNBC talked about the brutal market selloff of Monday and said days like these could make you “cry yourself to sleep.” Cramer said that this “nasty” selloff was expected.
“It’s exactly what you’d expect at this point in the rate cycle, the point where the Fed is about to start cutting rates to bolster the economy. But the economy is going down,” Cramer said.
Cramer said that the Monday selloff was “vicious enough” to make any investor think why they should stay in the market, but that’s exactly “what you have to do.” He thinks the latest decline is a buying opportunity for long-term investors.
Jim Cramer said that the selloff started because money managers who were borrowing money from Japan to invest in US stocks were caught with their “pants down” when Japan increased interest rates. As a result, these funds were forced to sell their stocks. He thinks it’s not possible to call a bottom on this decline yet “until we know these sellers are done unwinding their trades.”
Cramer said that another key reason why investors were selling on Monday was the notion that the Fed is late on cutting rates. But Cramer said a 25 bps rate cut wouldn’t have mattered a lot and if Fed Chair Jerome Powell sees there is a need for an urgent rate cut, he’d do it.
“He’s got horse sense,” Cramer said.
Jim Cramer said there are no “safe havens” in tech and while he reiterated his bullish view on some notable tech stocks, he advised investors to be ready for “pain” in the near term if they want to invest in technology.
“If you can’t take the pain, then get the heck out of it.”
For this article we watched several latest programs of Jim Cramer and picked 10 important stocks he’s talking about. With each stock we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Home Depot Inc (NYSE:HD)
Number of Hedge Fund Investors: 70
A caller asked Jim Cramer whether he should hold on to Home Depot Inc (NYSE:HD). Cramer said he likes the company’s 2.5% dividend yield and strong balance sheet. He believes a decline in interest rates would benefit Home Depot Inc (NYSE:HD).
“This stock trades on transactions of homes. When rates go lower you get more transactions and that’s why it’s a good stock to hold and below $350 I would buy the stock.”
Analysts believe Home Depot Inc (NYSE:HD) acquisition of specialty trade distribution company SRS Distribution was a master stroke from the company since it gave Home Depot a 17% market share in an industry with a total addressable market of $1 trillion. SRS is a residential specialty trade distribution company across several verticals serving professional roofers, landscapers and pool contractors. Home Depot Inc (NYSE:HD) is also investing in technology to improve business. Its pro intelligence tool and CRM platform that use data science for better insights and cross-selling opportunities are expected to boost sales and client relationships. In the first quarter, online sales saw a 3.3% increase, with nearly half of all online transactions fulfilled through physical stores.
During the first quarter, Home Depot Inc (NYSE:HD) paid $2.2 billion in dividends and $600 million in share buybacks. With a net leverage ratio of 1.5x EBITDA and an A credit rating, Home Depot Inc (NYSE:HD) is expected to generate $16.7 billion in free cash flow, representing 4.6% of its current market cap. The company currently yields 2.5%, with a cash payout ratio of 54%. Home Depot’s dividend has a five-year compound annual growth rate (CAGR) of 12.7% and has been increased annually for 14 consecutive years, including maintaining it during the Great Financial Crisis.
Polen Focus Growth Strategy stated the following regarding The Home Depot, Inc. (NYSE:HD) in its Q2 2024 investor letter:
“In the second quarter, the top relative contributors to the Portfolio’s performance were all names we do not hold: The Home Depot, Inc. (NYSE:HD), Meta Platforms, and AbbVie. With Home Depot, much of the quarter’s weakness came in April, as a higher-than-expected inflation reading caused investors to question the likelihood of imminent rate cuts in 2024. Given Home Depot’s sensitivity to interest rates, as it relates to home improvement projects, the stock sold off in the period.”
Overall, Home Depot, Inc. (NYSE:HD) ranks 9th on Insider Monkey’s list titled Jim Cramer is Talking About These 10 Stocks Amid Global Selloff. While we acknowledge the potential of Home Depot, Inc. (NYSE:HD), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than HD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
