UBS’ Best Stocks In The AI, Growth & Low Rates Era: Top 29 US Stocks

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

Number of Hedge Fund Investors In Q2 2024: 86

UBS’ Sector Rating: Attractive

Sector: Consumer Discretionary

Home Depot, Inc. (NYSE:HD) is one of the biggest home improvement retailers in America whose shares have been on quite a ride this year. From the start of 2024 to the first week of September, The Home Depot, Inc.’s (NYSE:HD) stock had gained just 4.34%. Since then, the shares have gained 9% to mark 13.8% in year-to-date gains. The firm, like other tertiary building and construction companies, is sensitive to high interest rates as they constrain consumer home improvement spending and lead to a drop in construction activity. Yet, The Home Depot, Inc.’s (NYSE:HD) scale, as evidenced by its $152 billion in trailing twelve-month revenue and $96.8 billion in total assets places it well to benefit from lower rates and the subsequent pickup in home improvement and building activity. Following the Fed’s 50 basis point rate cut in September, the mortgage market in the US is shifting as refinance applications measured by the Mortgage Bankers Association’s refinance index jumped by 20.3% annually during the week ending on September 20th. This came on the back of lowering mortgage rates, and future movements could unlock The Home Depot, Inc.’s (NYSE:HD) weak market.

Polen Capital mentioned The Home Depot, Inc. (NYSE:HD) in its Q2 2024 investor letter. Here is what the fund said:

“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.”