Michael Burry’s Latest Warning on Bullwhip Effect and 5 Retail Stocks to Watch

2. Lowe’s Companies, Inc. (NYSE:LOW)

Number of Hedge Fund Holders: 65    

Lowe’s Companies, Inc. (NYSE:LOW) is a home improvement retailer. On June 21, the company announced that it would be building more than 500 3D product assets in a push into the metaverse. The assets, available for free via the Open Builder platform of the company, will include lighting, patio furniture, area rugs, and kitchen and bath accessories. The firm expects consumers to soon walk through a planned home improvement setup in the metaverse to better visualize ideas. 

On June 22, MKM Partners analyst David Bellinger initiated coverage of Lowe’s Companies, Inc. (NYSE:LOW) stock with a Neutral rating and a price target of $190, noting that “rate headwinds appear to be building” for the firm. 

At the end of the first quarter of 2022, 65 hedge funds in the database of Insider Monkey held stakes worth $5.5 billion in Lowe’s Companies, Inc. (NYSE:LOW), compared to 72 in the preceding quarter worth $6.8 billion.

In its Q4 2021 investor letter, Pershing Square Capital Management, an asset management firm, highlighted a few stocks and Lowe’s Companies, Inc. (NYSE:LOW) was one of them. Here is what the fund said:

“Lowe’s Companies, Inc. (NYSE:LOW) is a high-quality business with significant long-term earnings growth potential

Supportive macroeconomic backdrop

 -Aging housing stock, lack of new inventory, robust home equity values, and unprecedented pro project backlog

-COVID-19 causing millennials to enter the housing market

Positioned to grow EPS largely independent of market conditions

-Idiosyncratic revenue opportunities driving share gains

-Self-help initiatives catalyzing operating margin expansion

-Buybacks representing ~8% of current market capitalization planned for 2022

Multi-year business transformation with substantial earnings upside

-Margin target of 13% has substantial upside; Home Depot at ~15.3% and increasing

-Potential to generate high-teens EPS growth over the next several years.

Lowe’s Companies, Inc. (NYSE:LOW) continues to trade at a significantly discounted P/E multiple relative to Home Depot despite materially higher prospective EPS growth. LOW’s share price including dividends increased 63% in 2021 and has decreased 10% year-to-date in 2022.”