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Once Again: Don’t Ignore The Boring Stocks

Paul Price finds opportunity in an obscure office supply company.
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Once Again: Don’t Ignore The Boring Stocks

Investors who chase only after the big-brand companies that they’ve heard of will find themselves throwing piles of money at high-priced stocks unlikely to post serious returns. 

Amazon  (AMZN) - Get Amazon.com, Inc. Report may be a household name, but their stock would need to jump by $325 to post even a 10 percent return.

Mid-value stocks, companies that make widgets, places whose names you’ve never seen in the headlines, these are the companies that make up the bulk of the stock market. They should also make up the bulk of your portfolio, according to Real Money's Paul Price  

“Acco Brands   (ACCO) - Get ACCO Brands Corporation Report is an office supply company with approximately $2 billion in annual sales," Price wrote recently on Real Money. "It is on track for a record year, with 2022 projected to be even better."

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Yet, despite this great news "Acco closed out September at just $8.59 per share. That left it selling for just 6.4 times Value Line's 2021 estimate while yielding over 3%."

According to Price "From 2015 through 2020 Acco carried an average multiple of 9.8 times. Simply bouncing back to that normalized price-to-earnings ratio would send Acco back up to $13.23 by Dec. 31."

Not glamorous, but  "reaching that very modest goal would generate a 54% gain from here, plus any dividends earned while waiting for the move."

Look out an extra year and Value Line sees earnings per share rising to $1.50. 9.8 times that number suggests a share price of $14.70 appears attainable within 15 to 16 months.”

Look at that again and compare it with our example up top. If Acco Brands gains $4.64 per share an investor would reap returns of 54 percent on their money. A $1,000 investment in the company would grow to $1,540. By contrast, our hypothetical Amazon investor would need to see their stock go up by 1,757 points in order to produce the same returns.

Acco Brands is not flashy. It produces office supplies, not telepathic ballistic delivery drones (or whatever Jeff Bezos is cooking up next). But you know who uses office supplies? Absolutely everybody. That’s why companies like this make up the majority of the stock market, and they should be the bread-and-butter of your portfolio.

Get more trading strategies and investing insights from the contributors on Real Money.