The Anti Dunder Mifflin

We hope everyone enjoyed the long weekend and the Thanksgiving holiday. While the time between Thanksgiving and New Year’s is generally very slow in the industry, there are still deals to be had.

Anyone familiar with today’s headline knows we are referring to the now syndicated TV show The Office, starring Steve Carell. Part of the humor related to the show is that the firm is a paper manufacturer, somewhat of a fading industry with the advent of e-commerce.

Along that mindset, today’s highlight is a household name that has survived a downturn and looks like a mover. The Office Depot, Inc. (NYSE – ODP - $5.45) is a well diversified retail and wholesale supplier of office products and services.

ODP passes our 3-tier checklist with flying colors. The technical analysis indicates a very bullish signal related to the Daily Moving Average all the way out to 50 days. The stock has been on a huge momentum run over 25% trading on nearly 10 million shares traded per day over the last three months. Finally, the forward P/E of 21 is less than half the trailing 12 month P/E with a 10% growth in top line forecast for 2014.

The Office Depot continues to innovate related to growing new market segments and customer needs. One key data point that came out of Black Friday was that the trend of online shopping from mobile apps is in a hyper-growth mode stage. According to data from IBM (NYSE – IBM) sales from mobile devices increased by 43% year over year on Black Friday in 2013 and accounted for over 21% of all online sales. The Office Depot has developed a high-end mobile app geared toward repeat customers and on time order fulfillment. Additionally, the merger with OfficeMax was completed earlier last month. The newly formed Company will be the second largest office supply firm offering higher-end services than the largest firm Staples, Inc. (NASDAQ – SPLS) and sharper focus than bargain all under one roof stores than Wal-Mart (NYSE – WMT).

We like ODP as a strong seasonal play on the New Year, as companies re-stock supplies for 2014. Look for a 10% pop over the next month or two.

Have a great day!

Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.

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