CNBC’s Jim Cramer suggested Monday that home improvement retailer Home Depot could function as a secular cyclical stock, growing regardless of business cycles and thriving when the economy is strong.
“Their hybrid model works,” he says. “The company’s long-term nature allows it to weather cyclical pain, so even if the Fed doesn’t move quickly enough to cut rates, Home Depot will still win.”
Lower interest rates tend to improve the housing market, which usually bodes well for housing stocks like Home Depot.
But Kramer first identified four “long-term trends” that are driving Home Depot’s success in the current economic environment, including a lack of new home sales and existing homes that are aging and in need of improvements. It also includes housing, he said. He continued that a significant number of millennial homeowners will shop at Home Depot, adding that there is a lot of home equity money for renovations in the United States. Kramer said the company’s specialty division has also been able to perform well because of the housing shortage, which has driven up prices for new homes.
But he emphasized that the company is poised for lasting success, not just in the current economic environment. He noted that the stock has risen more than 1 million percent since its market debut in 1981, and said growth is possible because of the company’s dual nature.
“Some might argue this is an unusual moment, but historically it’s actually not that unusual for Home Depot,” he said. “Businesses have booms and busts, but for most of the period since 1981, we continued to grow regardless.”
Home Depot did not respond to a request for comment.
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