One CEO Down, Two Doing Well

Those of you following my "find driven, smart CEOs and buy their stocks" strategy (see Update on My Three CEOs for details), may have noticed that Bob Nardelli, CEO of Home Depot, resigned yesterday. (taking $210 million with him, by the way) So much for that strategy with that stock.

Personally, Home Depot was the worst of my three, so it's probably a blessing in disguise. Now I need to decide whether to sell or hold. But as you can see, betting on a smart, driven person doesn't work all the time.

So to round out this post I might as well give an update on where I stand on the three stocks as of yesterday's close:

• Home Depot (HD) -- Down 2.5% since purchase (bought at $42.11 per share, now trading at $41.07.) This is actually up a good bit since my last report -- and Nardelli's resignation helped -- the stock was at $39 at the end of December. I'm sure news leaked out that Nardelli was out, and it went up a couple of bucks.

• J.P. Morgan Chase (JPM) -- Up 6.0% since purchase (bought at $45.33 per share, now trading at $48.07.) Still lots of work to be done at this bank, and I'm still bullish on Dimon. If anyone can make this company a big winner, he's the one!

• Disney (DIS) -- Up 36.6% since purchase (bought at $25.04 per share, now trading at $34.20.) A big winner -- and the Steve Jobs effect I wrote about hasn't even kicked in yet. Funny how I bought this stock because of one smart guy (Jobs) and it did so well because of another smart guy (Disney CEO Robert Iger.)

Comments

[Kirby]

I'd keep the HD, it's like investing in the alternative with that stock. Anybody other than Nardelli ought to be able to push Home Depot forward.

[TJP]

Nardelli wasn't doing a bad job with Home Depot, yet he was fired because of company stock performance.

Just a few things that Nardelli added to HD during his tenure:

1. Home services to the business, which accounts for 20% of annual revenue.

2. Self-checkouts make shopping at HD easier and more efficient.

3. Store-wide surveillance improved theft-loss management and customer service.

4. The company doubled in size - from $45 to $90 billion.

5. Home Depot is considering International expansion - largely in part to Nardelli's aggressive growth models.

All this occurred while competition with Lowe's intensified.

Nardelli put Home Depot "on the map." But I believe his resignation was tied to his very personal business style. Shareholders disagreed with many of his methods, so they gave him the axe. Whoever steps in as next CEO already has the foundation laid before him or her.

It'll be interesting to see how this stock performs in 2007. I'm bullish on the shares.