Herb Greenberg wrote a wonderful column and said something I’ve wanted to say for a long time, that blaming Bob Nardelli for the lackluster performance of Home Depot’s (HD) stock is just plain silly. Since Nardeli took over Home Depot in 2000, Home Depot’s earnings have grown at an amazing clip of 20% a year, revenues over 15%, net margins have increased and return on capital went up every single year. This is not a scorecard of failed CEO.
Those who are looking at Home Depot’s stock performance and blaming Nardelli for it need to separate between the analysis of a company and a stock. Home Depot’s stock has gone nowhere not because the company fundamentally did not perform well – the CEO’s main responsibility – the stock has not gone anywhere because it was overpriced in late 2000. As often happens, investors got overexcited about this great company and drove HD’s valuation to a ridiculous level of 46 times earnings.
If you bought Home Depot in late 2000, blame yourself (you overpaid for the company) not the CEO. I don’t know if any other CEO would have done a better job running this giant. As I have mentioned many times before, other large growth companies such as Johnson & Johnson (JNJ), Microsoft (MSFT) and Wal-Mart (WMT) – cannot forget this one, of course – were lifted to religion stock status in the late 90s and have been coming back to earth since. Bob (Nardelli), if you are reading this, ask for another bonus, you did a terrific job.
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