The turmoil in the markets makes it too easy to justify selling any stock these days. Yet, while panic never helps investors, it's still a good idea to play devil's advocate with investments.
Consider home improvement chain Home Depot
Here at the Motley Fool, we like to consider both the good and bad sides of an investment, so in this article, I've highlighted three of the main bearish arguments on Home Depot today. Be sure to read the bullish side here, as well, and then weigh in with your own comments below, or rate Home Depot in CAPS.
Falling revenue: Home Depot's recent earnings beat may appear rosy on the surface, but its relatively good performance came mostly from cost cutting and not from customers flowing back into its stores. Like Sears Holdings
(NASDAQ:SHLD)and Target (NYSE:TGT), Home Depot saw falling revenue in the second quarter, capped off with an 8% decrease in net income and a punishing 8.5% drop in same-store sales.
Weak housing market: Despite recent positive housing news that has been pushing homebuilder stocks like Pulte Homes
(NYSE:PHM), Hovnanian (NYSE:HOV), and KB Home (NYSE:KBH)higher, trouble remains in residential mortgages. And according to Deutsche Bank, it could remain for a while. Many CAPS members echo concerns that prolonged problems in the housing market will naturally spill over on home-improvement retailers such as Home Depot and Lowe's (NYSE:LOW).
- Go discount or go home: Many CAPS members, along with numerous economists and analysts, don't expect consumers to begin freely opening their wallets any time soon. The labor market continues to produce disappointing data which points to more restrained consumer spending, offering little support for an economic recovery and foretelling more struggles for retailers like Home Depot.
Of course, Home Depot has thrived through previous downturns. But the question of its future viability is why CAPS is such a great resource to augment your own analysis.
To see details of what CAPS members are saying now about Home Depot, just click on over to Motley Fool CAPS and have a look -- or add your own thoughts directly to this story in the comments box below.
The Motley Fool Inside Value team looks for beaten down stocks that are selling at bargain prices well below their intrinsic value. To see the full list of cheap companies the service is recommending today, take a free 30-day trial.
Fool contributor Dave Mock always looks both ways before crossing the street. He owns no shares of companies mentioned here. Home Depot, Lowe's, and Sears Holdings are Inside Value selections. The Fool's disclosure policy can't remember what happened at the office party last night, but has somehow acquired the nickname "peewee" among coworkers.