Rule One Investing Blog

I’ve purchased my first Rule #1 stock on January 18th, 2008.

I first found this stock about a year ago and put it on my watch list. However, I haven’t been monitoring my watch list until recently. I was then reading Phil Town’s blog when he put a ‘honor roll’ of the top 29 companies on the Forbes 400 best businesses. In that list Lowe’s was ranked as under MOS. I found my old spreadsheet and re-ran the numbers to calculate a new MOS for LOW. According to my calculations it close to the MOS. Being eager to get my first trade under my belt I purchased 25 shares.

• 25 Shares at $22.30 = $557.50 + 9.95 (trading fee) = $567.45

Background: Lowe’s is a major retailer of home improvement supplies similar to HomeDepot (HD), RONA (RONA – TSX) or Canadiantire.ca (CTC – TSX). This is a major business area with many home owners upgrading their house. And with the growth of TV shows like Flip This House the area of home improvements has been booming for the past 3-5 years.

I’ve assembled all the numbers and am working on a way to adequately put them in my posts.

ROIC: Looking at the numbers we can see that the Return On Investment Capital (ROIC) is above 10%.

Equity: Equity is decreasing. However, it’s still above 10% for the past 10 years.

EPS: Earnings per share is decreasing, however, it’s still at a very good growth rate.

Sales: Sales is decreasing too. This worries me a bit as it looks like someone might be trying to cross the moat. Home Depot or someone else?

Cash: Cash is at an all time low rate. This can be attributed to expansion by opening more stores. Not too worried about this one.

Debt: Debt is increasing too. Again this can be attributed to more store locations.

Meaning / Moat / Management /MOS and more analysis will be discussed in the next post.