One
quarter ago, I said I favored Lowe's
(NYSE: LOW) over Home Depot
(NYSE: HD), as I thought the difference in valuation outweighed the
difference in quality between the two companies. So far, so good with
that call, as Lowe's basically doubled Home Depot's return for the
past three months. While I do worry that both stocks are a little
expensive on the basis of investor optimism for a housing recovery, I
won't rule out the idea that an improved business plan coupled with
improving sales trends will be a powerful boost to earnings and cash
flow for Lowe's over the next few years.
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