Home Depot has borrowed 6 billion+ of money and added to their long term debt, in order to buy back their own stock. This February, they announced an 18 billion additional stock buyback. Trading at 24x likely fudged (how can you trust non-GAAP numbers???) "great earnings" based in large part on a shrinking number of shares. Buy back millions of shares, lower the total count, and earn the same thing as last year, and miraculously the EPS goes up! It's so obvious to anyone but people aren't smart enough to figure that one out. The PE is monstrously high based on a housing market that is reaching it's peak, a tapped out consumer, a Fed ready to raise rates, and an economy ready to collapse.
Why the buybacks? To "enhance shareholder value"? Or perhaps to ensure the overpaid executives for this monstrously poorly run juggernaut get the top dollar for their stock option exercises and sale of stock?
Methinks the latter.
The ridiculously inflated price created by the buybacks year after year means HD has now hit 123 this month, UNTIL reality hit briefly in the form of a 92 print. Of course, the Fed (now why is the HD CFO on The Fed in Atlanta, riddle me that one?) can't let that happen, and being in the DJI now (how did that happen, exactly?) in particular, the price bounced to 118 end of last week.
A huge data breach has not even been figured into earnings. It was bigger than the one Target had. 56 million people had their financial information compromised by The Home Depot. The bill is going to be a monster from the various expenses associated with this.
And then, there's China, who theoretically will benefit HD from devaluing, and yet more cheap goods. But what happens when we go to either a trade war with tariffs against China, or a real war with China which seems to be the drum beats I keep hearing in the MSM.
The flipside of the benefit theoretically derived by a cheap Chinese yuan is the strengthening USD vs. the yuan. So it's really a wash for HD although CFO Tome seems to only discuss how they plan on beating up their already beaten and bruised Chinese vendors.
As compared to the overpriced S&P, HD has run up 3x as fast based on some Blind Faith in not only the company, but their ability to grow based on a real estate market ready to top out and start moving down.
Expect the near term hold at 115 to fail next week, on its way back to a "test" of 110. Having traded at 92 in the past 2 weeks, with real valuations nowhere north of 90 for this stock, it seems only likely that level will be retested, and soon.
I'm long HD Jan 2016 120 puts.
-------------------- Anxiety is what you make it.
|
This "Rule 48" is some shady crap. HD was pre-market indicated at high 112s, then there was some totally bogus 113.8-114.6 quotes into the opening. I mean For Christ Sakes it's a DOW industrial stock.
Which may be the point. The entire action on this stock smacks of manipulation and is traded around like a yoyo, yet is propped up all stinking day above 114 for a while, then when "they" couldn't hold that, it literally refused to drop back below 113, of course when it did it dropped 50 cents in 3 minutes.
Once this turd breaks 111 area, look out below. Based on any kind of analysis, it should be trading at 90 on a good day, and tomorrow and going further into this month ain't going to be good days.
The stinking market makers for the options seem to think this stock has zero volatility, already got the 120 premiums smashed into the dirt. That's OK boys, my puts are now OFFICIALLY worth 7, so even if you think 4+ months is only worth less than 4% premium for time, then I refuse to sell them you freaking thieves. I suppose the company who keeps buying expensive shares knows the price won't drop too far, just keep borrowing money and buying more shares back you retards. Just like the Interline Brands addition for another whopping 1.6 billion in debt plus an integration into your retarded computer system that has to be the worst in addition to ZERO security as evidenced by the huge breach.
-------------------- Anxiety is what you make it.
|