NEW YORK (TheStreet) -- The last time we discussed Lowe's (LOW), I said that for its own good and for the sake of investors, the retail giant, which is immured in a battle with rival Home Depot (HD), had better start improving.Contrary to what some readers believed, I didn't think that was a huge demand. After all, "improving" is in the company's slogan. But here's the thing: Even though I wasn't particularly enamored with Lowe's recent performances, I still believed that Lowe's stock, which did not fully reflect the company's long-term potential, was a strong buy. By contrast, I felt that shares of Home Depot had reached their peak. This is even though no one could disagree that Home Depot had meaningfully outperformed Lowe's on an operational basis. Investors disagreed. The market had fallen in love with Home Depot, while overstating much of Lowe's weaknesses, many of which clearly just near-term struggles. In the span of two months, though, shares of Lowe's have been up by more than 12%, while Home Depot has traded flat.
I'm not going to blow one quarter out of proportion. But the first takeaway was that Lowe's outgrew Home Depot this quarter. It also says that the steps that management has taken to improve operational efficiency are beginning to pay dividends. And as evidenced by the 9.6% growth in same-store sales (or comps), which tracks the performances of stores that have been opened at least one year, there's no denying that Lowe's has found a solution to its merchandising and cost-management deficits. Although I had little doubt that Lowe's would eventually get its house in order, weak merchandising and a feeble cost structure had eroded Lowe's foundation, which led customers to Home Depot instead. That the company has now produced its best comp growth in a decade, I have to credit management It's been an extremely difficult environment, especially given the weak comps that we've seen from the likes of Wal-Mart ( WMT) (1% growth). WY) and Louisiana Pacific ( LPX), I more or less believe that the U.S. housing recovery has much more to do with the better-than-expected results.
The question, though, is how long can this continue? The good news is that Lowe's is no longer suffering from self-inflicted wounds. It seems as though Michael Jones, who the company added earlier this year as chief merchandising officer, already deserves a raise. For now, however, it is investors who have benefited from the company's hard work and solid improvements. These shares should end the year at $50. And until that mark is reached, I believe that this stock should be in your portfolio. At the time of publication, the author held no position in any of the stocks mentioned. Follow @saintssense This article was written by an independent contributor, separate from TheStreet's regular news coverage.