Analysis: HD

After you receive this Alert, we will be buying 75 shares of The Home Depot (HD) at roughly $184.33. Following the trade, HD will represent 1.38% of the portfolio.

We will scale deeper into our newest position which we initiated on Monday in our Alert here. As we wrote in that Alert, we believe the negative effects from weather clouded the company's full picture, making its post-earnings selloff an opportunity to buy. During the conference call, management noted how business ex-weather performed in line with their expectations and many departments achieved results above company average comps with only a couple in negative territory.

Meanwhile, we believe the stock has terrific downside support thanks to the recent capital return actions by management. Not only did they announce a new $15 billion share repurchase program and guide for $5 billion of 2019 buybacks with their recent earnings, but the huge 32% increase in the quarterly dividend has put the yield at 2.95%. JP Morgan analysts pointed out in a note from March 3rd it is a higher rate than the S&P 500's yield of 2.1%. This dividend yield is value for such a consistent, high-quality name like Home Depot.

Lastly, we like what we are seeing across the board in retail with the outlook for this spring trending positive. That's crucial because the spring is Home Depot's holiday season. Those are the months where Home Depot really shines and executes; we think selling before this was wrong and it is right to buy ahead of it. Therefore, we are not too concerned with last quarter's comp miss and the light forward guidance - we view this as management's trademark conservative nature.