Trading Home Depot's 20% Surge Amid Hedge Fund Buying

May 05, 2022 09:20

Home Depot, the largest home improvement retailer in the United States, performed well over the pandemic as homeowners took the time to remodel and improve their homes.  

However, while the stock price has closed negative for the first quarter of this year – in line with a global stock market sell-off – hedge fund buying has increased.  

With a lack of new houses and a growing trend to home working, Home Depot could be a stock to watch. Read on to learn more.  

Stock: Home Depot Inc
Exchange: NYSE
Symbol for Invest.MT5 Account: HD
Date of Idea: 5 May 2022
Time Line: 1 - 6 months
Entry Level: $319.00
Target Level: $373.00
Position Size for Invest.MT5 Account: Max 5%
Risk: High
  • The Invest.MT5 account allows you to buy real stocks and shares from 15 of the largest stock exchanges in the world.

All trading is high risk and you can lose more than you risk on a trade. Never invest more than you can afford to lose as some trades will lose and some trades will win. Start small to understand your own risk tolerance levels or practice on a demo account first to build your knowledge before investing. 

Why Trade Home Depot Stock?  

Home Depot (HD) was founded in 1978 and is the largest home improvement retailer in the United States with a market cap above $320 billion. The company supplies tools, appliances and construction services in the United States, Canada and Mexico from its more than 2,300 stores.  

The stock has gathered a lot of attention from institutional investors. For example, Ensemble Capital recently featured Home Depot stock in its Q1 2022 investor letter stating the demand for remodelling and home improvements, as well as the shortage of homes to buy and the supply chain crisis, has led to a huge increase in the price of Home Depot products.  

But, the company has managed to pass on these costs to consumers helping revenue to grow 37% over the past two years and the profit from each item they sell increased by 35%. Even investment banks such as Goldman Sachs have put Home Depot on its 50 stable stocks to buy list this year.  

Source: TipRanks, 4 May 2022 

According to the 13F filing reports of 203 hedge funds submitted to the Securities and Exchange Commission (SEC) supplied by TipRanks, hedge funds increased their holdings by 186.7k shares in the last quarter and have been buying consistently over the past four quarters. 

Of course, one issue to bear in mind is the fact as hedge funds have already been buying for some time they may be reaching a peak.  

Home Depot Stock Forecast - What do the Analysts Say? 

According to analysts polled by TipRanks for a Home Depot stock forecast in the last 3 months, there are currently 19 buy, 3 hold and 0 sell ratings on the stock. The highest price level for a Home Depot stock forecast is $455.00 with the lowest price target at $310.00.

The average price target for a Home Depot stock forecast is $373.18 which represents a more than 22% upside from current levels, at the time of writing. 

Source: TipRanks, 4 May 2022 

An Example Trading Idea for the Home Depot Stock Price

An example trading idea for the Home Depot stock forecast could be as follows:  

  • Buy the stock on a break above $319.00 to allow for current volatility amid Home Depot’s earnings report on 17 May 2022. 
  • Target just below the average analyst price target at $373.00. 
  • Keep your risk small at a maximum of 5% of your total account.   
  • Time Line = 1 – 6 months  
  • If you buy 10 Home Depot shares:  
    • If target is reached = $540.00 potential profit ($373.00 - $319.00 *10 shares).

It’s wise to remember that the share price is unlikely to go up in a straight line and it may even go much further down before it rises, especially considering the recent sell-off in global stock markets.  

Therefore, be sure to exercise good risk management which is one of the most important aspects of trading successfully. You should always know how much you could potentially lose on a trade and the risks involved.  

Another factor to consider is the commission as these can eat into your profits. With the Admirals Invest.MT5 account you can buy US stocks from $0.02 per share. This means buying 10 shares in Home Depot stock would result in a commission of $0.20 ($0.02 * 10 shares).  

There is a low minimum transaction fee of $1. So, the example trading idea above would result in a commission of just $1 overall! 

How to Buy Home Depot Stock in 4 Steps  

With Admirals, you can buy shares in companies like Home Depot with a low commission of just $0.02 per share and a low minimum commission of just $1 on US stocks. 

  1. Open an account with Admirals to access the Trader’s Room.   
  2. Click on Trade on one of your live or demo accounts to open the web platform.   
  3. Search for Home Depot at the bottom of the Market Watch window and drag the symbol onto the chart.   
  4. Use the one-click trading feature, or right-click and open a trading ticket to input your trade size, stop loss and take profit level.   

Source: Admirals MetaTrader 5 Web. Past performance is not a reliable indicator of future results, or future performance. 

Click on the banner below to buy Home Depot stock today! ▼▼▼ 

Do You See the Home Depot Stock Price Moving Differently?   

Remember that all analytics and trading ideas are based on the personal view and experience of the author.  

If you believe there is a higher chance Home Depot's share price will move lower, then you can also trade short from a CFD (Contracts for Difference) trading account which Admirals also provide.  

The Trade.MT5 and Trade.MT4 account allows you to speculate on the price direction of stocks and shares using CFDs.  

This means you can trade long and short to potentially profit from rising and falling stock prices. Learn more about CFDs in this How to Trade CFDs article. 


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Jitanchandra Solanki
Jitanchandra Solanki Financial Markets Author, Admirals London

Jitanchandra is a financial markets author with more than 15 years experience trading currencies, indices and US equities. He is an accredited Market Technician with a BA Hons degree.