Amazon takes a bite out of Costco & Home Depot shares, time to buy?

Both Costco and Home Depot have been regarded by money managers as “Amazon proof” until recently. Historically, these two retailing stocks have traded at very high valuations compared to other retailers.

Last month, news that Amazon was buying Whole Foods sent grocery stocks reeling. Costco, along with Kroger, Supervalu, Target and Walmart all tumbled in value. Even some European grocers like Sainsbury and Tesco sank on the announcement of the takeover deal.

Last week, Amazon said it would sell Sear’s Kenmore brand appliances. Shares of Home Depot, along with Lowe’s, Best Buy and Whirlpool were slammed. The loss of value for these stocks was about $12.5 billion. Keep in mind, with the Sears deal, Amazon will now be selling a product line that is not available at Home Depot or Lowe’s stores.

“Analysts at Robert W. Baird said the selloff in Home Depot and Lowe’s was an overreaction. The nearly $7.5 billion market cap loss in Home Depot stock equals slightly more than the amount of its annual appliance sales. Lowe’s stock loss was a little more than 50 percent of its $7 billion in annual appliance sales.”

Buying premium value stocks like Costco and Home Depot when they fall is very difficult. Sometimes looking at their charts can indicate when the bleeding has stop and all the panicky investors have sold their shares.

Looking at the one year chart of Costco, you can see that buyers are coming in near the $150 price range. The 52 week low for Costco is around $142 so the downside risk is relatively small. This could be a buying opportunity if you believe that the Amazon threat has been blown out of portion.

Looking at the one year chart of Home Depot, there seems to be investor support at the $145 level but the stock could fall to the next support level which is around $135 per share. It could be too early to buy because it has only been a week since the Amazon / Sears news announcement. You could take a part position now and average down if the shares continue to fall or you could wait another couple of weeks to see if the $145 level holds.

What do you think? Are Costco and Home Depot still Amazon proof?