"If it were about recovery, rival Staples wouldn't be down 16% for the year," he said. Instead the Mad Money host thinks the turn is company specific.
The potential catalysts follow:
- Expectations: "They were incredibly low," said Cramer. "Last year Office Max got put through the metaphorical meat-grinder, falling from $17 to $4, so as the company came into 2012 the bar was set very low."
- Shareholder friendly: "Back on August 2nd the company announced that it was reinstating its 2-cent per share quarterly dividend—the stock now has about a 1% yield—and the company also told us it was conducting a comprehensive capital allocation review designed to simplify its balance sheet," Cramer said.
- Boise Cascade: "Two weeks ago we learned about the IPO of Boise Cascade, a private company that makes paper, corrugated containers, wood products and building materials. The important thing about Boise Cascade is that Office Max owns twenty to thirty percent of this company, and the IPO will unlock some hidden value by putting a hard value on their investment," Cramer explained.
- Divestiture: "Office Max is also exploring the sale of its Croxley business in New Zealand, something we should hear more about when the company reports its fourth quarter results early next year."
All told, Cramer thinks gains in the stock are due to a growing appreciation for the company.
"As it turns out, the Street may have come to realize that Office Max was actually worth a lot more than people had thought when they initially wrote the company off and left it for dead. Investors thought this stock was a value trap, but it turns out that it actually has real value, as the company had a much better balance sheet than we imagined."
What's the bottom line?
"I couldn't recommend buying Office Max up here after this huge run, but the company is doing better than the competition and its balance sheet turns out to be a heck of a lot better than anyone believed six months ago. So if we get a huge fiscal cliff induced pullback, I think you can feel good about buying Office Max into weakness."
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