Analysis: HD

Shortly after the opening bell, we will be selling 50 shares of Home Depot (HD) at a bid/ask of $233.90/$234.66. Following the trade, HD (150 shares) will represent 1.26% of the portfolio.  

In our Thursday Alert here, we said we would have trimmed our Home Depot position if we were not restricted from doing so. With our restrictions free today, we will make that HD trim at what will be our highest sale price to date.

Over the last few days, we have looked to raise cash because the trusty SP Oscillator reading has been in a big overbought condition. We discussed this during our September members-only conference call that you can watch the replay of here, and said that we want to raise cash by selling some of our stocks that have moved up the most.

That's Home Depot. Shares have been a terrific winner as of late, reached a new all-time high yesterday, and are up ~36% year-to-date. But with this move the stock's price-to-earnings multiple has expanded multiple turns since the start of the year, and that's why our concern is about valuation.

We say that because our decision is not based on the company's operations. We think the business is doing just fine -analysts at Citi raised their price target on HD to $269 this morning - and instead it's about how this stock has moved up a little too fast for our taste. We still think this stock can go higher because the low interest rate environment has made housing conditions more favorable and management has a huge buyback in place, but feel that it is prudent to take some off around this new all-time high.

We will realize an average gain of about 27% with this sale.

For more information about our trading restrictions, please see here.