Mortgage rates still remain near 7%. And many borrowers were able to refinance well under 5% in recent years. That’s keeping potential sellers on the sidelines, as the cost to carry a mortgage factors heavily into the total cost.
While the housing market remains sticky, homeowners continue to spend on projects to maintain the value of their home. And that bodes well for companies that provide those goods and services to homeowners.
For instance, retailer Home Depot (HD) reported its first increase in same-store sales in two years. That was a bullish sign for the company, even more than Home Depot’s cautious guidance.
Overall, Home Depot has had a mixed year. Earnings growth is down 4%, but revenues are up 6%. And shares are fairly valued at about 24 times earnings.
Action to take: Shares of the home improvement retailer are still down about 10% from their all-time highs, a fair price point for investors willing to start a long-term stake. It’s also a company investors can look to add to during a market downturn.
Plus, at current prices, Home Depot pays a 2.4% dividend.
For traders, Home Depot is right around the middle of its trading range over the past six months. Given the earnings reaction, shares are likely to trend higher. The May $430 calls, last trading for about $4.65, could see mid-double-digit returns in the months ahead.
Disclosure: The author of this article has no position in the company mentioned here, but may to trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.