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Non-Tech : Home Depot (HD) -- Ignore unavailable to you. Want to Upgrade?

To: Ausdauer who wrote (979)	7/23/2002 4:06:27 PM
From: Don Earl	Read Replies (1) \| Respond to of 1169

Aus, A certain amount of lively debate makes the boards more interesting. I've also found it tends to sharpen the quality of my own DD when I find myself going back over research to confirm first impressions. There are a lot of things I look for when evaluating potential investments which probably amount to personal style more than anything else. I tend to think of those items as "red flags". One red flag equals an avoid rating in most cases. Things like: debt to equity over .2, executive compensation in excess of that earned by officers at Disney, bad charts, low cash balances, high cash burn, excessively declining revenue, etc. Most of those items I'm able to screen out, or pick up at a glance in Yahoo profiles. The hard part is comparing information in Yahoo profiles against SEC filings. Is there off balance sheet debt? Is there convertible or preferred outstanding which amount to dilution or additional debt? Is there a pattern of executives borrowing money from the company? Is there a pattern of excessive stock grants? Are current costs expensed or capitalized? Are depreciation rates in line with the useful life of the assets? Are items fully disclosed or is there a flavor of coloring the reports? etc. No red flags with a bottoming pattern in the charts equals a potential long position. 3 or more red flags, combined with a bad chart, equals a potential short play. I'd rate HD at 9 red flags with a bad chart. Since most investors use a somewhat different approach, I expect to see differences of opinions on a regular basis. I don't take it personally when others disagree with my views, and hopefully others don't take it personally when I disagree with their's. Heck, if everyone agreed with me on every point, there wouldn't be much to talk about, and if I though I knew everything, I wouldn't throw things out on the boards for second opinions.