No. of Recommendations: 3
When you said saturated, do you mean locally (US based locations)? Or does this also include global markets (at least feasible ones, bigger cities, etc).

Sqft growth was 6% yoy in the past quarter. The 05 annual mentioned that they would open 400-500 stores in the next 5 years. Take it out 3 years, for example, and you are looking at 80-100 stores on a base of 2300, or ~4%. No amount of international expansion, unless something miraculous happens, is going to accelerate this growth rate on a base of 2000+ stores.

A small point on HD - sure, the stock price has risen from the low 30s to 40. You can make a convincing argument that the valuation was understated as indicated by the BMW method or whatever method you want to use. Still, what's happen to cause that rise? Did HD report positive same store sales comparisons in Q2 and Q3? No - in fact, SSS were down 5% in Q3, with Oct the weakest month in the quarter (down 8.7%). So did HD predict a SSS turnaround in Q4? No. So did HD report strong Q3 earnings growth? No - EPS was up 1%. So was average ticket up or was some other metric favorable? No.

Clearly the compression of the sqft growth rate is largely responsible for HD the stock's issues for quite some time because as noted Nardelli and team has successful raised margins to peak levels. So - did the company simply reach a bottom based on valuation and a happy market - and this market has been very happy - moved it higher regardless of the news? Or is the market suggesting that HD's new growth plans are going to be successful, that margins won't fall from the current high levels, that same store sales will re-accelerate next year? Perhaps. However, this is a hard sell.

So, does this invalidate the gain that anyone had buying at $33 or $35 with the stock at $40? Nope. Still - you can't argue that there is a convincing change in the fundamentals, and since everything has been happy lately can you really attribute a modest ~15% gain to anything other than fortunate timing? Don't know - but I wouldn't. That doesn't mean I'm right or anything, but it is nice to have an obvious confirmation in the evidence.

If it matters, I am long HD but have been peeling back mainly because I don't feel like I can adequately evaluate the company anymore since they are going into non-store growth areas. This is less a reflection of the company's ultimate success than my own analysis inadequacies, but there are other stocks one can buy so...

Just make money though...(my last post - enjoy this board very much)
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