The primary question investors might ask at the moment is whether or not Home Depot Inc. (NYSE:HD) represents an attractive opportunity? Long story short, the future performance of the leading home improvement retailer is fully dependent upon the underlying strength of the U.S. economy, which will most likely continue to grow in the upcoming quarters or even years. Nonetheless, let’s take a quick glance at some indicators and recent developments to see whether Home Depot represents an attractive investment relative to other companies in the market. Just recently, Home Depot’s Board of Directors declared an increase of 17% in the company’s quarterly dividend to $0.69 per share, which denotes a current dividend yield of 1.88%. The stock is priced at 18.07-times expected earnings, below the forward P/E multiple of 19.2 for the Home Improvement industry. Therefore, one could say that Home Depot is fairly valued at this point in time. It should be noted that the company’s management anticipates sales growth in the range of 5.1%-to-6.0% for fiscal 2016 and diluted earnings-per-share growth (after anticipated share repurchases) in the range of 12%-to-13%. So Home Depot Inc. (NYSE:HD) probably deserves a higher valuation given the current state of the U.S. economy. At the end of February 2016, analysts at BMO Capital Markets reiterated the ‘Outperform’ rating on the stock and raise the price target to $144 from $137.
What have hedge funds been doing with Home Depot Inc. (NYSE:HD)?
Heading into 2016, a total of 62 of the hedge funds tracked by Insider Monkey were long this stock, a decline of 10% from the third quarter. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Fisher Asset Management, managed by Ken Fisher, holds the most valuable position in Home Depot Inc. (NYSE:HD). Fisher Asset Management has a $1.12 billion position in the stock, comprising 2.2% of its 13F portfolio. The second most bullish fund manager is AQR Capital Management, managed by Cliff Asness, which holds a $321.9 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish comprise Phill Gross and Robert Atchinson’s Adage Capital Management, John Armitage’s Egerton Capital Limited and Ken Griffin’s Citadel Investment Group.
Judging by the fact that Home Depot Inc. (NYSE:HD) has witnessed bearish sentiment from the aggregate hedge fund industry, we can see that there was a specific group of fund managers that slashed their entire stakes by the end of the third quarter. It’s worth mentioning that Matthew Hulsizer’s PEAK6 Capital Management dumped the biggest position of the “upper crust” of funds followed by Insider Monkey, comprising an estimated $45.2 million in stock. Rob Citrone’s fund, Discovery Capital Management, also dumped its stock, about $39.6 million worth. These transactions are interesting, as total hedge fund interest was cut by 7 funds by the end of the third quarter.
The final page of this article examines the hedge fund activity in several companies that have market capitalizations similar to the one of Home Depot.
