We are initiating a position in Home Depot , buying 50 shares at roughly $361.22. Following the trade, Jim Cramer’s Charitable Trust will own 50 shares of HD at a weighting of about 0.55%. Now that the market is no longer overbought according to the S & P Short Range Oscillator , we are dipping into our large cash position to start a new position in Home Depot. Although we are putting some money to work Wednesday, we are keeping our first buy on the smaller side given our view that September could be a rocky month for the market. If volatility tied to economic concerns or the upcoming U.S. presidential election picks up in the weeks ahead, we’ll have plenty of room to keep adding to this position. Home Depot is having a mixed year, with shares up about 5% year to date. After rallying to $395 a share in March when the market anticipated as many as six interest rate cuts this year, the stock then traded as low as $325 in May as investors reset their expectations on Federal Reserve policy adjustments. But Home Depot has finally started to work again as rates plunged on a series of softer inflation prints with resilient economic data. Still, the stock is well below its late 2021 high of $415 a share — a peak it reached a few months before the rate-hiking cycle began in March 2022. Now, with the Fed widely expected to cut at its upcoming September meeting , we are looking to increase our exposure to quality companies like Home Depot that have been held down in this high interest rate environment but will see their industries improve as rates come down. We think rate cuts should help Home Depot take out its old high over time, and we are setting our price target at $420 a share. In previous cycles, the mortgage rate range where you typically start to see the big increase in housing turnover — the main driver of Home Depot’s business — is around 5% to 6.5%. We’ve already seen some confirmation that below 6.5% is where activity picks up, according to CEO Ted Decker on the company’s second-quarter earnings call in August. He said that when rates went below 6.5% toward the end of last year, “you saw an immediate increase in housing activity, mortgage applications, mortgage [refinancing] applications.” With mortgage rates currently at around 6.5% — and potentially falling further in the quarters ahead as the Fed becomes more accommodative — the time is right to start buying Home Depot. To be sure, a drop in mortgage rates won’t improve Home Depot’s business overnight. There’s typically a lag effect. Earlier Wednesday at a Goldman Sachs retail conference, Decker explained the process: “When you think of buy the home; get the mortgage; close in two, three months; move into the home, hang some pictures; figure out what project you might want to do; there’s definitely a lag for projects when you buy a new home.” Sure, there may concerns about the health of the U.S. consumer, but housing is a different animal because rising home values tend to lead…
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