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Tuesday, July 18, 2006

Widely Traded 48 Hour Clock: Home Depot's Skeptics

Stocks: (LOW)(WMT)(HD)(TGT)

Home Depot announed today that it would sell internet advertising at its website. Since has 4 million visitors each week, that seems like a pretty good deal, and something that might generate revenue and cement relationships with vendors.

No one seemed to care, at least on Wall Street.

Home Depot is suffering from the issues that companies like Target and Wal-Mart have seen. Same stores sales are tough. Target indicated that their July numbers could be as low as 3% instead of being as high as 6% which was the top end of their previous estimate. The most recent Wal-Mart same store number was 1%.

Jim Cramer has suggested swapping out of Home Depot and into Lowes.

Home Depot is in a strange position. Investors are so upset with executive compensation and other governance issues that they refuse to give the company any break in the market. Despite Home Depot's size and past growth rate, it hits a 52-week low almost every week and now trades at a 12-month low of $32.85. The company's price to sales ratio is not only 0.8. Lowes, by contrast is at 0.96.

It is not good news when the market leader trades at a discount to its competition.

Douglas A. McIntyre can be reached at He does not own shares in companies that he writes about.

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