Home Depot Tops Dow the Past Five Years

 | Jun 13, 2013 | 10:00 AM EDT  | Comments
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Stock quotes in this article:

hd

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pfe

,

csco

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ge

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bac

,

aa

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hpq

Home Depot (HD) has achieved twice the total return of any other stock in the Dow Jones Industrial Average over the past five years.

From June 12, 2008 through June 12, 2013, the home improvement retailer has returned 234%, including reinvested dividends. No other stock has come close, the second-best performance being a 115% return in UnitedHealth Group (UNH).

The table below shows the top five and bottom five performers among the 30 stocks in the Dow industrials.

Dow Leaders and Laggards

Five Year Return

Five Best

 

Home Depot (HD)

234%

UnitedHealth Group (UNH)

115%

Walt Disney (DIS)

103%

Pfizer (PFE)

101%

McDonald's (MCD)

95%

Five Worst

 

General Electric (GE)

-1%

Cisco (CSCO)

-3%

Hewlett-Packard (HPQ)

-43%

Bank of America (BAC)

-53%

Alcoa (AA)

-76%

 

Home Depot can do well in periods when new homes are selling briskly, or when homeowners are on an improvement binge. Lately, we're seeing a little of both -- which is why Home Depot was up 50% last year and is up about 23% this year through Wednesday.

It's been a great run for Home Depot. But now that the stock has climbed to more than 23x earnings and nearly 7x book value, I would stay away. If I owned the stock, I would cash in at least some gains.

On the winners' list, I prefer Pfizer (PFE), a big international drug company whose shares I own for a few clients. It offers a dividend yield well above 3%, sells for 13 x earnings, and has a good toehold in emerging markets, where it gets about 20% of its sales.

On the loser's list, I like Cisco (CSCO), see my column of May 17), which is one of the most unloved stocks I've ever seen despite its terrific profit margins and high return on equity.

I also think both GE (GE) and Bank of America (BAC) will be better than average performers over the next one-to- three years. By no means have they solved all their problems, but they have solved enough to make them attractive at current valuations. GE goes for 15x earnings. Bank of America fetches 14x earnings and only 0.7x book value (corporate net worth per share).

Hewlett-Packard (HPQ) and Alcoa (AA) both are dirt cheap, but have been stumbling badly. I would wait for the glimmering of an operational turnaround before buying them.

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