Lowe’s Cos. Inc. (LOW) A great choice based on the simple but powerful concept of convergence in valuation, Lowe’s is a great company, but when compared to the larger and modestly more recognized brand Home Depot Inc. (HD), Lowe’s stock wasn’t getting the shine it deserved to begin the year. Also a bet on the booming home improvement sector and red-hot housing market, LOW stock has done marvelously in 2021, appreciating by more than 50%. Its most recent quarter saw U.S. same-store sales growth of 33.7% on a two-year basis. A dividend aristocrat,
Lowe’s is praised for prioritizing returning cash to shareholders by buying back $2.9 billion in stock and paying $563 million in dividends last quarter. Lowe’s as a brand is more friendly to individual consumers and homeowners, setting up their stores with a homeowner in mind. Lowe’s has also gone to great lengths to cater to the female customer, a niche that Home Depot has struggled with.Lowe’s superior paint department alone brings much more female home owners in and gives them choices and attention that is almost a joke at Home Depot. The personal customer attention is far superior also. We see Lowe’s to be in an advantageous position to take more market share over the holidays, as well as the next several years. Shares trade for less than 20 times forward earnings, a more than 20% discount to Home Depot’s forward P-E ratio of 25, showing an undervalued position in a value driven sector.
YTD returns: +54.9%
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