Stock to Buy: Home Depot
The first stock to buy is Home Depot – The setup for Home Depot is very positive. On Friday Home Depot broke above resistance but ultimately closed down .64% due to the overall negative market conditions. The general P/E ratio range is between 19 and 28. The trailing 4 quarters of earnings comes to $9.73 per share. The 19 P/E ratio on $9.73 per share gives a low end price of $184.87. On the High end with a 28 P/E the price would be about $272.44. If Home Depot only got up to the prior high of $215.43 it would represent a gain of 14% in the next few weeks
Stock to Buy: McDonald’s
On Friday McDonald’s like Home Depot broke above a resistance line but McDonald’s did close higher in a bad market showing significant strength to outperform going forward. If we put a 28 P/E on the trailing earnings of $7.54 we come to a high end price of $211.12. Given recent business and stock performance I do believe that it is possible for P/E expansion.
Stock Pick: Microsoft
With Microsoft a hair below all time highs it is setting up well to continue the rally. The support of the prior high is at about $115 and looks fairly strong. With a 3 year P/E range of 20-40 the stock has a potential range from $86.20 to 172.40. This leaves significant upside to MSFT in the future.