Home Depot or Lowe’s? Two traders disagree on which is the better bet

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Home Depot and Lowe’s are breaking out.

The two stocks hit record highs Wednesday — Home Depot for a second day in a row, Lowe’s for a third. The two chains were investor favorites during the pandemic as consumers spent more on home improvement.

But as for the better bet, a technician and a fundamentals investor are on opposite sides.  

JC O’Hara, chief market technician at MKM Partners, says the charts lean in Home Depot’s favor.  

“When I look at Home Depot, I think the breakout is a little bit more powerful,” O’Hara told CNBC’s “Trading Nation” on Wednesday. “This chart has a history of sideways consolidation for multiple months followed by extremely bullish breakouts.”

The current consolidation reminds O’Hara of a similar stretch from 2018 to 2019 when the stock moved sideways for 18 months before rallying 20%.

“If history repeats itself, we could see Home Depot up at $320, even to $340. So that’s why I like Home Depot at this juncture,” said O’Hara.

Home Depot closed Wednesday at $292.75.

The fundamentals make a better case for Lowe’s, argues Quint Tatro, president of Joule Financial.

“From a qualitative standpoint we think Lowe’s really appeals to the DIY, sort of home-improvement guy, Home Depot more to the contractor,” a distinction that should benefit Lowe’s given recent stimulus checks, Tatro said during the same interview.

Tatro also points to a more attractive 1.6 times sales and 16 times forward earnings for Lowe’s compared with a 2.3 times sales and 21 times forward multiple for Home Depot.

“Plus, as a kicker you’re getting a much better balance sheet from Lowe’s than you are from Home Depot,” added Tatro.

Home Depot and Lowe’s have outperformed the S&P 500 this year, rising by at least 10% while the benchmark index has added less than 4%.