Between the Congressional investigation into anti-trust laws violations and the latest reports of price gouging ahead of Hurricane Irma, it’s no surprise that some of the media pundits are shorting Amazon (AMZN).
Now that’s certainly one way to play this juggernaut…
But it’s definitely not the smartest – unless, of course, you’re okay with losing all of your money.
And it’s on a retailer that’s virtually Amazon-proof…
How Home Depot’s “BOPIS” Model Puts You in Position to Make Unlimited Cash
Three months ago, on July 20, Amazon.com, Inc. (AMZN) announced they were going to start selling Sears Kenmore branded appliances online, including a line of smart appliances that can be voice-controlled by Amazon’s Alexa.
Naturally, this had a negative impact on many of the brick and mortar stores, like Whirlpool Corporation (WHR), Best Buy Co., Inc. (BBY), and Lowe’s Companies, Inc. (LOW), which all fell a significant percentage in share price that day.
But one store, The Home Depot, Inc. (HD), has rallied higher to over $155 per share ever since falling 4% that day. And this one won’t be “Amazon’ed,’ like the others.
In just the first quarter, HD‘s online sales rose 23% year over year and continues to report strong growth, (coming in at +5.5%, +5.8%, +5.5% again over recent quarters), gross margin preservation, expansion of operating margins, and double-digit earnings per share growth. It’s also produced an impressive more than 10% earnings growth rate over the last five years (sourced by InvestorPlace).
And it’s all thanks to their “Buy Online, Pick Up In Stores (BOPIS)” model. In fact, about 25% of HD‘s $3.76 billion in total website sales (almost $1 billion) came from their BOPIS program, according to the Internet Retailer’s Report.
Now I come from a Home Depot background, having worked there in my previous retail life, and they they can fulfill many of their orders from local stores – so their delivery is actually much quicker than AMZN’s. But the real catalyst behind their successful model is that people like to buy their home repair items, like paint, flooring, tools, and fixtures, in person. They want to be able to take the time to inspect, feel, and gauge everything they’re going to buy instead of ordering online.
After all, it’s hard to make big home improvement purchases without actually seeing it for yourself first – and HD gets that. For that reason, the largest home improvement chain in the U.S. is doing, and will continue to do, very well.
Now some of the pundits might say that AMZN should still be a concern for the likes of HD, but I just don’t see it as substantial an adverse effect they want us to believe. HD has been strong- despite what AMZN has done. And even with their multi-billion dollar Whole Foods deal shaking up retailers share prices again, HD continues to stay relatively strong and bounce back.
Just take a look at its price chart…
(Image sourced by www.TomsOptionTools.com)
So right now, I encourage you to keep an eye on HD for a possible buy-on-the-dip type of play, using long call options with three to six months until expiration (which will let you exploit any price pops higher).
Also, consider using the $145 price level as a technical stop loss point. This means that if the stock breaks down below that price level on a closing basis, you could consider using that as your signal to close any bullish positions and preserve your capital for the next trade.
Now I could see HD running higher – up to $155 – in the short-term and then back to its prior highs right around $158. So long as the stock keeps going higher, there’s no limit to how much money you could make when using call options.
Of course, this isn’t an actual trade recommendation – I’m simply showing you why HD is such a strong contender against AMZN and a better way to play the stock than what the pundits are saying on the news networks. So you’ll want to speak with your financial professional before making any changes to your portfolio.
To your continued success,
Source: Power Profit Trades