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Strategies & Market Trends : Value Investing

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To: Bob Rudd who wrote (16061)	1/3/2003 4:38:24 PM
From: Mark Marcellus	Read Replies (2) of 78574

Well, you've got smart people on both sides of this one. A lot of it depends on how much you buy into the new management. Longtime HD veterans would argue differently, but I think the current problems are a legacy of the old management, who remained stuck in a 1980's style retail model for far too long. SSS growth is definitely behind them, although there's still plenty of room for the business to grow and earnings to increase. The balance sheet is strong, cash flow is strong, and I expect that increases in some areas in SG&A will be largely offset by cost savings in others. No question that this will be a tough couple of years for HD, but I don't see a big downside at these levels. Mediocre returns, maybe, if I've misjudged management, but not a KMart style disaster unless I've REALLY misjudged management.

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