Q: I'm considering selling DOO for HD. Would you consider this a good move? I'm not happy about the big drop with DOO and trying not to make an emotional decision.
A DOO bounce back looks 1-2 years away and wondering if the gains would be greater with HD. This would be for 5-10 year hold. Thanks
A DOO bounce back looks 1-2 years away and wondering if the gains would be greater with HD. This would be for 5-10 year hold. Thanks
5i Research Answer:
We like both names, and both are exposed to discretionary consumer spending. We think if the economy recovers DOO has more potential for capital appreciation than HD as HD is largely mature. HD is also 54X as large as DOO so it is much harder to move the needle. HD is also 3X as expensive on valuation so a multiple improvement would help DOO more.
Of course, we don’t like negative momentum for sure, but switching one name to the other just because the company has a bad quarter, we don’t think would make sense here. With the decline in DOO already embedded we would be OK giving it some more time to see how it performs in a different rate environment. It is possible the company was being extra conservative in its guidance.