Fed rate cuts boost new stock position amid September volatility

On September 4, 2024, Jim Cramer's Charitable Trust initiated a new position in Home Depot, acquiring 50 shares at a weighting of approximately 0.55%. This decision comes as the market shows signs of volatility, prompting a cautious approach with a smaller initial investment. The move is influenced by recent Fed rate cuts and softer inflation data, which are expected to benefit companies like Home Depot that have struggled in a high-interest rate environment. CEO Ted Decker highlighted that a decrease in mortgage rates could eventually lead to increased housing turnover, a key driver for Home Depot's business. He noted that historically, significant increases in housing activity occur when mortgage rates fall within the 5% to 6.5% range. Although the company does not anticipate positive same-store sales growth until mid-2025, there is optimism that the market will react positively ahead of this inflection point. Home Depot's management has paused its stock buyback program until 2026 due to a recent $10 billion bond issuance for an acquisition, aiming to reduce its debt-to-EBITDAR ratio. Despite this, the company has seen a substantial increase in equity values since 2019, which could support future growth as housing activity picks up. Overall, the strategic investment in Home Depot reflects a belief in the company's potential recovery as economic conditions improve, particularly with anticipated Fed rate cuts that could stimulate the housing market and, in turn, boost Home Depot's performance.