During the October 8 episode of Mad Money, Jim Cramer pointed to The Home Depot, Inc. (NYSE:HD) as an example of how quickly beaten-down consumer stocks could respond to relief in the bond market. Discussing the company’s rally, he said:
Everything on the diversification side of the ledger was flying. Take Home Depot. This one has just been killing us at the Charitable Trust. But suddenly it is up $9, more than 3% today. Why? Well, we’ve been having these Treasury bond auctions. I’ve been talking about them with you… And how the new goal is to be able to sit on your hands, not buy anything until the auction is over. Well, the auction is over. We got a 30-year auction today, last round of auctions. And once it was over, it was as if interest rates breathed a sigh of relief. There was a sense of what could happen to the beaten-down retailers if rates are going to go down or at least stop going higher.
Just a week earlier, Cramer had offered a much less hopeful assessment of Home Depot’s near-term prospects. That discussion also examined a sales detail that complicates the picture of resilient customer spending.
Smaller Projects Are Keeping Customers Engaged
The Home Depot, Inc. is still finding growth while customers remain selective about home improvement spending. Fiscal second-quarter sales increased 5.7% to $47.9 billion, with comparable sales rising 1.7% globally and 1.3% in the United States. Adjusted diluted EPS improved to $4.92 from $4.68. Management attributed the better-than-expected quarter partly to continued demand for smaller projects. Those results give Cramer’s comment some support that the company does not need a full housing recovery to grow. A revival in larger renovations would provide another source of demand, although the timing remains uncertain. Home Depot also features among stocks selected for high returns on equity. The list’s introduction raises a useful question about what a strong reading actually reveals about a business. Cramer explained why he would consider buying before that recovery becomes obvious, as he said:
You have to think Home Depot’s selling at less than 19 times next year’s earnings. It yields 3.15%. It’s historically low like McDonald’s. You have to buy Home Depot when it’s out of favor because you’re just going to end up chasing it much higher, maybe to $400 once rates start coming down. Today was a sneak preview of what will happen to this stock when the bond market calms down and perhaps oil one day goes lower.
The Recovery Still Has to Reach Earnings
Management’s outlook remains measured. The Home Depot, Inc. reaffirmed fiscal 2026 comparable-sales growth of approximately flat to 2%, along with adjusted EPS growth of flat to 4%. Its guidance includes tariff refunds that are expected to partially offset unexpected fuel, energy, and other input costs. That leaves relatively modest earnings growth even after a stronger second quarter.
The valuation also deserves context. Home Depot trades at approximately 19.2x forward earnings, compared with 15.1x for Lowe’s. Its annualized dividend of $9.32 represented a yield of approximately 3.2%. These readings are close to Cramer’s quoted figures, but Home Depot still sells at a premium over its closest listed competitor. A lower share price does not automatically make the stock inexpensive relative to the rest of the industry. Buyers are still paying for Home Depot to deliver a stronger business performance, and a temporary improvement in Treasury yields would not by itself establish that a lasting spending recovery has begun. The comparison changes when Home Depot is measured against the valuations investors paid for it in previous years. Its dividend history adds another consideration, with a trade-off that the current yield alone does not reveal.
Institutional Ownership Remains Broad
Insider Monkey’s database of over 1000 hedge funds showed 98 hedge funds holding Home Depot in Q2, compared with 100 in Q1. Among those funds, Fisher Asset Management was the top shareholder with 10.36 million shares. Short interest stood at 1.18% of the public float. The small decline in fund participation and limited short positioning suggest a stock facing doubts about its recovery rather than widespread bets against the business.
Cramer is looking for the opportunity before customers return to bigger projects. The Home Depot, Inc.’s recent results show that it can make progress in the meantime, but the premium to Lowe’s means investors are not getting that potential recovery for free. The next step is for improving sentiment to translate into more substantial sales and earnings growth.
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