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Jim Van Meerten, Barchart (10 clicks)
Momentum, long only
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It looks like there is new life in Office Depot (ODP) after the hedge fund Starboard Value took a 13% stake in the company and management has announced it will trim expense by selling off its stores in Mexico and moving to smaller stores in the US.

The market has responded very positively to the news and the share price is showing great signs of upward momentum. During the last 2 1/2 months while my market proxy, the Value Line Index, was about flat, the shares of ODP were up 88% and the major competition Staples (SPLS) was up only 5%:

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Technical factors provided by Barchart:

  • 100% Barchart technical buy signal
  • Trend Spotter buy signal
  • Trading above its 20, 50 and 100 day moving averages
  • 7 new highs and up 25.11% in the last month
  • Relative strength Index 65.15%
  • Barchart computes a technical support level at 2.63
  • Recently traded at 2.88 with a 50 day moving average of 2.36


Fundamental factors:

  • 13 Wall Street brokerage firms have assigned 19 analysts to run numbers on this issue
  • As the company restructures revenue is expected to be down 5.10% this year and another .70% next year
  • Earnings from the sale of assets and cuts in rental expenses due to smaller stores could mean a 100% increase in earnings this year and analysts estimate that could continue at an increased annual rate of 10% over the next 5 years
  • At the present the financial strength rating is a weak C

Investor interest:

  • Wall Street analysts think you should hold on to your positions and have issued 1 strong buy, 1 buy, 15 hold and 2 under perform or sell recommendations on this issue
  • 624 individual investors on Motley Fool have given the stock a 79% vote of confidence to beat the market
  • Short interest is around 32 million shares which is about 7 days worth of the average days volume. If the price continues to move up, the short sellers will have to cover their position with buy orders

Conclusion: Office Depot is selling at only 2.88 per share and looks to be a good low priced speculative play. Cash from sales of Mexican locations and moves in the US to smaller locations should hit the bottom line. I recommend speculative investors buy a few share and move mental stop losses up as the moving averages and turtle channel increase to protect you profits:

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Source: Office Depot Looks Like A Bargain