Buffett Could Buy All of Home Depot

With how much Warren Buffett, founder of Berkshire Hathaway, says he has as cash in the bank, he could buy Home Depot Inc. (NYSE: HD), the largest home improvement company in America. And he could take it private. The Oracle of Omaha says he has $347 billion in cash on hand. No one has been able to figure out what he may do with it. He said, at Berkshire’s annual meeting he was “pretty close” to a $10 billion deal, but failed to pull the trigger.

Buffett has pulled the trigger on some major buyouts. He took the huge railroad Burlington Northern Santa Fe private in 2009 for $26 billion. He took insurance company GEICO private in 1995 when he bought the 51% of shares he did not already own for $2.3 billion.

Is Home Depot a Good Buy?

Home Depot has a market cap of $355 billion. That makes it the 22nd most valuable company in the world based on that measure. Its stock has fallen slightly more than 7% this year, which is about the same as the S&P 500. Its stock is up 55% over the last five years, while the S&P 500 is up 97%.

Home Depot was founded in 1978, by Bernie Marcus, Arthur Blank, Ken Langone, and Pat Farrah. Langone, a financier, has a net worth of almost $8 billion today. Marcus has a net worth of $10 billion. He was Home Depot CEO until 1997 and board chair until 2002.

Home Depot has 2,347 stores in North America today. It employs 465,000 “associates,” which makes it the 13th largest company in the United States based on that yardstick.

In the most recently reported year, Home Depot had revenue of $159.5 billion, which was up 4.5% year over year. Net income was $14.8 billion, down 2.2%. President and CEO Ted Decker commented, “Throughout the year, we remained steadfast in our investments across our strategic initiatives to position ourselves for continued success, despite uncertain macroeconomic conditions and a higher interest rate environment that impacted home improvement demand.”

Home Depot forecast that revenue would grow 2.8% this year but per-share earnings would fall 3.0%.

Buffett would need to be bullish for the U.S. housing market to be strong over the next few years. Based on mortgage rates and slow home sales, he would need to see a financial improvement in the sector soon.

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