Cramer Says Buy Lowe's (LOW), Sell Home Depot (HD)

On last night's Mad Money, Cramer introduced a new segment to his show, "In The Ring", in which he compares two very similar companies in an effort to decide which one to buy. The first ever In The Ring compares the top two home improvement retailers, Home Depot (NYSE: HD) and Lowe's (NYSE: LOW).

In order to compare the two retailers, Cramer uses metrics he says professional money managers would use to do their analysis. After considering what sector each company is in, Cramer turns to growth, and in the case of Home Depot and Lowe's, he uses same store sales as a measure. With comps that were down 7.9% at Home Depot and down only 5.2% at Lowe's, Cramer chalked this one up to Lowe's.

Cramer's next metric: market share. The Mad Money host notes that Lowe's most recently gained about 1.2% of the market, at the same time that Home Depot's market share fell. Specifically, Cramer points out that Lowe's took share from Home Depot in 17 out of 20 of its product categories, while Home Depot lost share in 8 out of 13 of its categories.

Cramer further considered potential growth; to arrive at a conclusion, he said that new store openings was a great way to measure this. Home Depot is expected to open 55 new stores, versus Lowe's expected 120 new stores, meaning Lowe's, the smaller company by market cap, wins this round too.

Lastly, Cramer calls on another important measure of performance: the dividend. Cramer, possibly feeling bad for the "Home Des-pot", as he calls it, notes Home Depot's 3% yield, compared to Lowe's only 1% yield. On the other hand, Cramer said that Home Depot's yield is higher "because the stock fell so much..."

Based on his evaluation, Cramer said he "wouldn't touch Home Depot with a 10-foot pole", but believes Lowe's looks attractive, especially on a pullback. Cramer's final decision: buy Lowe's, sell Home Depot.

The Home Depot, Inc. operates as a home improvement retailer primarily in the United States, Canada, and Mexico.

Lowe's Companies, Inc. and its subsidiaries operate as a home improvement retailer in the United States and Canada.

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