A Nice, Boring Business

 | May 17, 2012 | 5:30 PM EDT  | Comments
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Boring is sometimes better. Amid all the hype surrounding Facebook's IPO, one might think glitz and glam are the only ways to make money on Wall Street.

If you didn't get in early on the Facebook phenomenon, fear not. I can recommend another avenue to solid investment opportunities: the office supply industry. Whoa, you may be thinking, pens and paper, staples and stationery -- that's exciting?

No, office supplies are not exciting, and that is precisely my point. On my website, Validea.com, are computerized strategies I modeled after the strategies created by some of Wall Street's greatest investors. What sector is currently earning the top consensus among the guru strategies? Yep, office supplies. This consensus uses my proprietary Validea Industry Index that identifies industries that have the best characteristics for long-term stock performance, and the office supply business is at the top of the heap at the moment.

If you follow stocks for any length of time, the fact that a sector like office supplies scores highly should come as no surprise. While the showy sectors get the publicity, the more mundane sectors often prove themselves to be solid, long-term performers.

Within the office supplies sector, two companies are particularly noteworthy. Deluxe (DLX) sells personalized printed products such as checks and promotional products, including writing instruments. It prints checks for small businesses as well as banks and credit unions. In addition, it provides marketing services, including web design, web hosting, email marketing and logo design.

Joel Greenblatt is a strategist whom I have been following for some time, and his strategy gives Deluxe a high grade. The strategy uses just two variables: earnings yield and return on total capital. Deluxe's earnings yield is 14.76%, which ranks it No. 144 among the thousands of stocks in our database. Its return on total capital is a very strong 151.56%, ranking No. 25 among the stocks in our database. The strategy's last step combines the first two criteria into a final ranking. Among all the stocks in our database, Deluxe comes in at a very strong No. 12, a ranking every investor should pay attention to.

United Stationers (USTR) is a favorite of my Benjamin Graham-based strategy. This company distributes office equipment and supplies to over 25,000 resellers, office products superstores, drug and grocery store chains, e-commerce merchants and others. The Graham strategy likes the company's sizable sales, a high degree of financial liquidity, limited debt and a moderate price-to-earnings ratio (11.70).

In many aspects of life, avoiding the mundane because it is boring is justifiable. But not in the world of investing. Sometimes the ordinary can prove to have extraordinary qualities as investment opportunities.

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