With the economic stimulus package right around the corner, it might be smart to make a few speculative plays on which stocks are likely to benefit the most. Home Depot and Loews are on the top of my list.

Eligible people will receive a $600 “advancement” on next years taxes, plus $300 per dependant. A family of four would receive a check totaling $1800, provided they don’t earn over the criteria.

With this amount of money fresh in the hands of consumers, chances are that a very select few will save it and the remainder will blow it on something. Home improvement stores top my list because the amount ($600) is about the price of most big appliances and summer home improvement ideas. The checks will come just in time for summer and things like lawn mowers, new air conditioners, a variety of landscaping elements etc.

To profit from this, we’ll have to see a very good quarter come out of either stock. Out of the two mentioned, Home Depot is well off its highs and looks a lot better for a turnaround than Loews. For example’s sake, lets suppose we want to invest in Home Depot.

In this particular scenario, it is a lively quarterly earnings report that we want to see out of Home Depot. Because quarters are compared to the previous year quarter, it is very likely that Home Depot will destroy last years earnings. No economic stimulus last year, $155 Billion stimulus this year. Got it?

To maximize our returns and limit the downside, we’ll elect to buy January 09 call options with a $20 strike price for just $9.10 each. This can also be used to further leverage our position, but its better just to limit the downside if HD happens to fall off a cliff.

The timeframe to January 09 also gives some time to sell when we want, rather than be tied to just a few months after earnings announcements. Good earnings in the second quarter could easily carry into the third and beyond, it really just depends on how effective this economic stimulus is.

Consider buying some Home Depot calls as a quick way to make some money when the economic stimulus package goes through. This is certainly one store that will benefit the most from the $155 Billion burning a whole in the public’s pocket. That $155 Billion has to go somewhere, I think it will go to the home improvement stores.