The Stock Spotlight:  Home Depot

 By Ashley McNally

I purchased 3,701 shares of Home Depot (HD) at $27.02. I later sold my shares for $22.72 for a loss of 15.91%. The period that I had invested in the stock market faced much volatility and has resulted in the recession that is still ongoing. Many of the stocks have faced similar fates to Home Depot in the past months as virtually all industries have been impacted by the recession. Home Depot’s CEO believes that the home improvement industry will remain under pressure for the remainder of 2008 and likely into the beginning of 2009. It was estimated that annual profit for the chain could drop about 24% this year due to the housing crisis impacting many consumers and lenders. This has resulted in the company closing stores that it deemed unprofitable and eliminating jobs in areas such as human resources to cut costs for the company.            

The struggling economy has played a major part in the decline in the profits for many firms. Throughout this semester I have witnessed the AIG bailout, the government bailout of Freddie Mac and Fannie Mae, the plummeting of oil prices, and other historic events regarding the economy. General Motors is also being hit hard by the economy and what will happen to that company is yet to be realized. The toxic mortgage problems have crippled the economy and consumers who are trying to make it through the recession. The reaction of consumers to cut back on spending has affected retailers too, causing a domino-effect on all segments of the economy. The London Interbank Offering Rate (LIBOR) has also shown problems in the stock market. At one point the spread between overnight and one month bond rates was 2% different, thus illustrating the risk in lending money between banks for longer than one night. The stock market is very volatile at the moment but in the long run, the market will likely rebound. Those that take the risks now, known as speculators, may earn large profits once the markets turn around.