Ticker Shock: Four Reasons Staples Rules Office Supply

By Glenn Curtis  AUG 25, 2009 10:15 AM

Tuesday's top stories and stocks with potential to move.


Asian stocks were down overnight, but just a bit. The Hang Seng and the Nikkei were off 0.49% and 0.79%, respectively. European stocks were in the red earlier this morning, too. And here in the US, we're currently trading higher.

Here’s what I’m seeing this morning:

Excluding items, the retailer earned $0.16 in the second quarter. That was in line with expectations. However I think a lot of people, right or wrong, may hone in on the statement within the release that explains it's not offering up earnings or sales guidance.

Some thoughts:

I’m a glass-half-full guy when it comes to Staples right now. I'm far more optimistic about it than I was a couple of quarters back. And of the big-name office-supply retailers, this is the one I’d rather be in.

2. If there's a sell-off early on in the session, I’d see it as an opportunity to pick up shares.

3. There was an insider buy at just over $20 back in June. I’m not saying I’d belly up to the bar just because of that purchase. But if I were looking to hop aboard, that sure would make me feel a bit more comfortable.

4. This is one of those stocks that a couple of years from now, we may be looking back, thinking "man, that was cheap back then."

Medtronic (MDT):
Excluding items, the big-name device company put up $0.79 in its first quarter. That was a penny better than expected. In addition, it beat on the top line, which was nice to see, too.

My take:

1. All things considered, it was a decent quarter. Nothing to write home about, but decent. And given its solid reputation and the fact that it trades at just 12.1 times this year’s estimate (of $3.15), I find it hard to ignore.

2. There’s also the dividend. Although it’s not the biggest on the Street, it's worth a glance. The forward yield is a smidge over 2%.

3. And don’t forget the share-repurchase plan. Google (GOOG):
As fellow Minyan Justin Sharon pointed out in his column earlier this morning ThinkEquity upgraded these guys “to Buy from Source of Funds.”

My thoughts:

1. It could get a nice bounce early in the session. That said, you won’t see me hopping aboard on the heels of this news.

2. Yeah, I realize that betting against Eric Schmidt and his posse makes about as much sense as trying to catch a flaming arrow. But I’m not betting against them. It's just -- and this may sound a tad cliché -- I see more risk than reward at this particular point. Besides, I’d rather put my flash on Bartz over at Yahoo (YHOO). Additionally, I don’t find much comfort in the fact that everyone seems so confident these guys are going to hit $500.

Professor Sharon also kindly points out that Jefferies slapped a Buy rating on Mastercard.

My take:

1. Given America's affection for plastic and the finer things in life, I sense Mastercard is going to do quite well over time, which is why I'm a bull.

2. I’m noticing that over the last couple of months, the estimates for this year and next rose. And at about 15.9 times next year’s estimate of $12.85, I find it hard to ignore. I see at least 20% upside potential here within the next 12 to 18 months.

Have a great day
No positions in stocks mentioned.

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