Usually when we talk about stocks, we look at whether an asset is a good investment to trade or to hold. Trading stocks are ones where we see volatility. We expect prices to fluctuate, making this a good asset to buy or sell in the near-term. Holding stocks are ones where we see long-term value in the company. We expect the business to do well, making this a good asset to keep in your portfolio while it grows.
In the case of ACCO Brands ACCO, Paul Price sees both at once.
“You can sometimes find a stock that looks terrific as a trading vehicle, yet also appears poised for substantial gains over time, Price wrote recently on Real Money.
ACCO Brands appears to be exactly that type of holding. The company is behind such brands as Barrilito, Derwent, Leitz, and Mead.
In recent years, ACCO’s five most recent multi-month declines have averaged losses of 49.1%, Price pointed out. However, the five rebounds averaged a much better 142.7%. “Clearly, buying ACCO after major drawdowns has been a proven way to generate excellent profits,” he wrote.
Curiously, the current 17.1% decline, as of a week ago, was lower than the others. “Why is that? ACCO just finished a fabulous year. If fourth-quarter results come in as expected, earnings per share will have grown from $0.70 in Covid-ravaged 2020 to about $1.30 - $1.35 in 2021. The real question is not why it's down 17%, but why it is not much, much higher. At $8.10 the shares sold for just 6.1-times trailing earnings.”
Price sees ACCO Brands as having a strong business model and good fundamentals. Yet at the same time, its stock price has swung within a range of nearly 20 percent over the past year. This makes it a good stock for traders who want to turn a quick profit and investors who want to grow their portfolio over time.
“The best way to play appears to be outright purchase of shares. Selling puts with attractive break-even points is merely the icing on the cake,” Price wrote.