Stephanie Link: Don't Count Out HD and LOW

NEW YORK (TheStreet) -- Year to date both Home Depot (HD) and Lowe's (LOW) are off 7% on concerns about the lackluster demand from the consumer and the potential negative impact from the cold/wet weather that has been seen around the country in December, January, and the first part of February (we are all anxiously awaiting the next big snow storm that is expected to hit the North East tomorrow).

There are also questions about where we are in the housing cycle and whether or not the Do-it-Yourself retailers have been played out - last year HD was up 33.1% and LOW's rallied 39.5% and from the March 2009 lows HD is up 320% and LOW up 241%. I think the decline in each of them is an opportunity to buy into a theme that has more upside and where comps should continue to be strong for the next several years. Certainly, weather has played a role in likely depressing the near-term traffic trends, but over the long term, housing sales continue to recover, driving consumers to furnish them and fix them up.

For reference - the housing recovery is definitely evident with New Home Sales at a 414,000 annualized rate vs. the February 2011 low at 270,000 annualized and Existing Home Sales currently stand at 4.87 million annualized vs. the July 2010 low at 3.45 million annualized rate. I also look at the U.S. housing turnover figures and although we have seen higher levels of activity, the National Association of Realtors and U.S. Census Bureau say we are still 10.4% below its 25 year average - so more room to run. In addition, the prices of homes continues to rise with the most current Case-Shiller and CoreLogic figures showing a 12% increase in home prices in the latest month of data. This is the most important driver of renovation and remodeling spend and both Masco (MAS) and Owens Corning (OC) confirmed this strength in their quarters this week.

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