Reversing Peter Lynch’s Thinking

I have wanted to write about this topic for many months but finally hit my boiling point after my experiences this weekend at the Home Depot. Peter Lynch likes to buy what he knows and what he uses (whether it is a specific hotel or new product). He once bought thousands of shares in a new hotel chain based on the great service, cleanliness and positive atmosphere he experienced while on business trips. The trade was very successful and his method was duplicated time and time again. I don’t trade like this but I wish I could reverse his thinking and short the hell of Home Depot (HD). I can’t tell you how many times I have walked into that place in a good mood but left angry based on the lack of help, professionalism and knowledge that these employees exude.

These big box stores have taken over the nation and we have lost the smaller, independent local stores that actually housed knowledgeable individuals that could help you with almost anything pertaining to their products or your own project. I specifically target Home Depot because it is 5 minutes from my house and I go there on a weekly or bi-weekly basis (forced to go since I don’t feel like driving 30 minutes to the closest local hardware store). Remember, I live in NJ, home to every chain store in America. It is bad enough that many of their employees don’t know much about the actual “how-to” to most projects but I can’t understand why they don’t even know where most of their products are located throughout the store. I don’t want to stereotype every Home Depot employee but the knowledgeable employees are few and far between.

A place like Home Depot stays in business due to the advantages they have when pricing items but I am willing to pay more to go to a place that can help answer some questions. My only problem with going to the small time hardware store is my time – I value my time and I don’t want to waste it driving in traffic for a round trip of one hour. The more I think about it, the more I figure it may be worth my time to only go to the small store when I have questions and only step into Home Depot when I know what I want and don’t have any questions. I may still have a problem because the employees might not know where the products are located so I will have to go on the usual scavenger hunt to find what I need.

Best Buy has the same problems when it comes to electronics but they have responded to some degree by integrating the Geek Squad to help with computers. I bought my most recent flat screen television at PC Richards based on the extensive knowledge of the salesman. Everything he said was right on cue and he helped us in many ways and allowed us to make an educated decision on which television would suit our needs best. For example: before meeting this guy, I didn’t know the difference between HDMI and component cables and how they affect the image and sound of the unit. Do you know how pissed-off I would be if I bought a system without HDMI technology. I don’t like “pushy” salespeople but I sometimes prefer them because they study the products they sell since it is directly related to their bottom line. Without commissions, they don’t get paid so their knowledge and customer satisfaction goes a long way. Many Home Depot employees could care less and I make this statement based on the fact that I have witnesses several of them using cell phones during work which I know is against their policies.

Now that I am done ranting, I tie this all together with the fact that Home Depot just signaled a descending triple bottom breakdown on the point and figure chart (a short term signal for a short position). If this was the old days and I was a major player, I would aim to take this stock down by gathering together a shorting pool. If investing was this simple, a kid would know what stocks to buy and what stocks to short (based on my life experiences at Home Depot, they should be out of business by now).

Piranha