(MONEY Magazine) – Not long ago, Home Depot (HD), the 1,735-store home-improvement chain, was Exhibit A in the case against investing in behemoths. Growth slows. Smaller, nimbler competitors eat your lunch. But these days Home Depot is a shining example of another attribute of large companies: resilience. CEO Robert Nardelli has remodeled stores, upgraded inventory management and reignited growth. Merrill Lynch analyst Danielle Fox expects profits to rise 11% this year.

Despite all this, Home Depot shares have been flat over the past six months. Investors are worried that higher interest rates will slow housing sales, dampening demand for hardware. We think those fears are overblown. Sure, rising interest rates may trigger a dip in the stock in the next month or two, and you might be able to buy it for less than its current price. But it's never easy to time purchases precisely, and with a P/E of 17 (based on estimated 2004 earnings) Home Depot already looks like a bargain to us. Nardelli's fixes--still a work in progress--should power growth even through leaner times. And the days ahead may not be all that lean. The bulk of Home Depot's customers will still need bolts, paint, screws and tools even if mortgage rates soar. "Do-it-yourselfers, Home Depot's core customers, will continue to spend," says Peter Jankovskis of OakBrook Investments, which has been buying Home Depot shares. --STEPHEN GANDEL