Home Depot - My Most Frustrating Stock

I've lost more money on other stocks. In fact, I've been complicit in some spectacular collapses. Nevertheless perhaps my most frustrating stock of all time is Home Depot. I purchased Home Depot in 2000 for about $48 a share. It closed today for $30.88. Unfortunately it is in an account that is a hassle to access and expensive to trade so I've left it in there hoping for an eventually turnaround.

The last seven years have been a chamber of horrors. Bernie Marcus and Arthur Blank wisely understood that for Home Depot to reach the next stage they needed to bring in a top flight CEO. Unfortunately they hired Bob Nardelli instead.

Actually Bob Nardelli did some good things operationally that were needed. He brought disciple to the supply chain. He simplified the management structure. But he also destroyed a very positive culture and under invested in the stores. Bob Nardelli was no merchant.

I was actually supportive of Mr. Nardelli's expansion into the commercial supply business. Thinking like the GE trained executive he was he saw an opportunity to leverage Home Depots' improved supply chain and enormous purchasing power.

But all of those commercial supply assets were purchased at top dollar. With Nardelli gone Home Depot began to dismantle his industrial vision to return to its shopkeeper roots. But now those assets were unloaded at bargain basement prices. The money was supposed to go a long way toward a massive stock buyback that was going to finally get the shares moving. But they screwed even that up. The price of Home Depot Supply had to be lowered even more and the share buyback was diluted as a result.

Just prior to Nardelli getting the boot its was rumored that Home Depot could be taken out in a private equity deal. To deter this Nardelli immediately leveraged up the balance sheet by issuing a huge bond offering lowering the company's credit rating.

Nardelli's crowning achievement in arrogance was the infamous stockholder meeting. I won't recount the whole sordid tale but I've never seen anything like it. It was clear that Nardelli was going out of his way to tell the shareholders that he could care less what they thought.

The big countdown clock limiting shareholder comments to just a few minutes each combined with the security goons dressed in orange Home Depot aprons was something out of a bad movie. If a shareholder ran over their 2 minutes the microphone was turned off and the security thugs began moving in to silence the share owning corporate interlopers.

Now Home Depot Supply has been sold off in a fire sale. The balance sheet is loaded with debt. The Home Depot landscaping supply business is being shut down. The Home Depot Expo high end stores have never moved beyond a hobby. The sharp downturn in the housing industry is adding insult to injury.

It is finally time to bite the bullet, sell this dog, and continue shopping at Lowes.

Disclosure: at the time of this posting the author was long HD.