Good Morning – We are buying Home Depot to 2% in Focus Equity using proceeds from IVV.
Investment Thesis:
- Home Depot has a durable moat driven by scale, niche focus, and low-cost provider status with best-in-class supply chain and technology infrastructure.
- Underlying housing fundamentals should be supportive of long-term home improvement spending trends.
3. Home Improvement online penetration is low and Home Depot has refined an omni-channel approach that is efficient and specialized, giving them an edge and insulating them from pure e-commerce encroachment.
- Growth opportunity in large and fragmented addressable market especially in the professional category. They are investing to enhance their capital-efficient, low-cost platform to go after incremental market share opportunities.
- Strong balance sheet and capital efficient model leads to solid FCF generation and high ROIC. GDP plus growth with modest operating leverage combined with share buybacks and growing dividend leads to strong long-term value creation.
Sarah Kanwal
Equity Analyst, Director
Direct: 617.226.0022
Fax: 617.523.8118
Crestwood Advisors
One Liberty Square, Suite 500
Boston, MA 02109