During a rocky week, The Dow
Despite a few risks that still need ironing out, the housing sector continues to show signs that it's near the bottom. A better housing market has benefited Home Depot immensely -- in 2011 same-store sales rose an impressive 3.4% before soaring 5.8% last quarter. This week, however, chief competitor Lowe's posted a disappointing quarter, with just 2.6% same-store sales growth, and lowered its earnings guidance. Investors are taking this as just one more sign that Home Depot's success may be due not just to a gradual housing rebound, but that the retailer is beating the competition.
Despite its Mexican bribery scandal that is the subject of ongoing investigations, Wal-Mart hit a 52-week high. One thing playing in its favor is that the company's small-store format is topping company expectations and becoming profitable in under a year after opening. Interestingly, the world's largest retailer only has a tiny direct influence on the Dow, though its performance can filter in to expectations for other bellwethers like General Electric
Hewlett-Packard soared this week despite posting weak earnings. New CEO Meg Whitman announced that the company has decided to lay off 8% of its workforce (in part through early retirement) in order to save $3 billion to $3.5 billion annually. Some of these savings will be applied to research and development, an area that, frankly, the company may have underinvested in under her predecessors. In 2010 and 2011, HP spent 2.3% and 2.5% of its revenue on R&D.
Home Depot, Wal-Mart, and Hewlett-Packard all crushed the market this week. If you're looking for some intriguing stock ideas, The Motley Fool's chief investment officer picked his top stock for the year -- it's a company that is revolutionizing commerce in rapidly developing Latin American economies. For a limited time, you can get instant access to the name of this company and a special report for free by clicking here.
Ilan Moscovitz doesn't own shares of any companies mentioned. Motley Fool newsletter services have recommended buying shares of The Home Depot. Motley Fool newsletter services have recommended writing covered calls on Lowe's Companies. Motley Fool newsletter services have recommended creating a diagonal call position in Wal-Mart Stores. The Motley Fool has a disclosure policy.
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