I'm reiterating my Buy rating for 3M Co. (NYSE: MMM), first recommended on April 20, 2009 at a price of $51.97. If you bought 3M in April, you're up an impressive 46%.

Way back in the spring, I argued, among other factors, that a strong case for buying 3M shares could be made based on the company's large free cash flow and net returns on capital, and reasonable P/E (then about 11), before everyone else jumped on the bandwagon.

Well, with a current P/E of about18, 3M is no where near as cheap, but I still like the shares here, around $75.

Staples (NASDAQ: SPLS), a seller of office supplies and a competitor of chains such as Office Depot (NYSE: ODP), OfficeMax (NYSE: OMX), and Wal-Mart (NYSE: WMT), reported Q2 earnings on Tuesday. Although they weren't that great, I can't say I felt they were a total disaster, either. I think the quarter was lackluster and indicative of the immense work ahead for management in terms of getting people into their stores and increasing sales per transaction.

According to the press release, total sales increased 9% and adjusted earnings per share declined 24% to 16 cents. That's a steep drop, but they did match analyst expectations. Staples used the increase it saw in free cash flow in a smart way: debt reduction. I approve of that move, to be sure.

Staples (NASDAQ: SPLS) issued its Q1 report on Wednesday. Call me unimpressed. It beat earnings estimates by a penny, coming in at 22 cents on an adjusted basis. Sure, that's what investors want to see. They want the bottom line to go beyond expectations.

But there isn't a lot of excitement to be had with the Staples story. According to the press release, that 22-cent figure represented a decline of 27% in per-share profit. Furthermore, there's weakness in terms of same-store sales. In the North American market, comps dipped 8%. On the international front, comps went down by 14% in Europe.

"I've always liked Staples (NASDAQ: SPLS); the company has traditionally put up good numbers, and the stock price has been rewarding for investors over the years," says Chuck Carlson, noting, "Staples is the world's largest office products company. With $27 billion in sales, Staples serves customers in 27 countries."

The editor of the blue chip advisory, The DRIP Investor, adds, "The stock has gotten hammered by a variety of issues." Here's his review. It is down 40% from its 52-week high

"Yes, the environment for retailers is lousy. Yes, it's tough to see any near-term improvement. And, yes, debt is evil right now. But the stock is already discounting to a large degree those negatives. The stock's current price level is attractive enough to warrant some nibbling.

Rough day for office supply retailer Office Depot (NYSE: ODP) yesterday. The firm saw its shares fall slightly more than 13% after reporting a fourth-quarter loss of $5.64 per share. A year ago, ODP raked in a profit of seven cents per share, a stark turnaround thanks to the current economy. These results included charges of $4.54 per share and 37 cents per share, all of which stemmed from costs to close certain facilities, cut jobs and write-down assets. Adjusting the results for these changes, ODP lost 73 cents per share - still much larger than the six-cent loss expected by the Street.

Quarterly sales slumped 15% to $3.27 billion from last year's sales of $3.87 billion. Breaking the sales down a bit, the sultan of staples saw its sales in North America fall 17% - with international sales slipping 15%.

Poor Office Depot (NYSE: ODP). Have you checked the price of the retailer's stock lately? It closed on Wednesday with a value of $2.10. It actually rose over 11% that day upon news of its third-quarter earnings. I can assure you that I wasn't buying the stock.

The numbers didn't tell the story of a company that would make a worthy addition to a stock portfolio hell bent on hanging tough during a market meltdown. Instead, the 7% revenue decrease and the loss per share, on an adjusted basis, of $0.01 relate a tale of a business that one should ignore. At least that's the way I see things. Comps in the North American retail division were horrible. The return on invested capital as calculated by management took a significant drop. Let's face it, Office Depot just isn't cutting it. Granted, the economy is wreaking havoc on the business, but come to think of it, I don't really have a good picture of what the brand is supposed to be about. Well, I know it's about office supplies, but why should I shop there as opposed to Staples (NASDAQ: SPLS) or OfficeMax (NYSE: OMX)? Good question, huh? Looks like the retailer needs to get the message out as to why the shopping experience at its locations is of a higher value compared to the office stores mentioned. For that matter, I'm sure a lot of people use Wal-Mart (NYSE: WMT) to pick up office supplies too. My point is that management needs to step up its game and create some better marketing programs for its stores. Be creative like Staples. That "easy button" device is turning into a cool cultural icon (well, I might be exaggerating, but I think it's creative, at any rate).

Earlier, I said "at least that's the way I see things" in terms of my opinion about the sad state of Office Depot, but I suppose I should point out that there are obviously a lot of investors out there who don't see a lot to love when it comes to this chain. The stock is down over 63% on the one-month period at the time of this writing. I see no reason to speculate on this business. The economy isn't getting better, and Office Depot just doesn't seem to be in a strong position. What will it take to turn things around? Like I say, in addition to hoping for an improved macro climate, come up with a better advertising campaign, build a more intense connection with the consumer. Office supplies are commodities, but shopping experience is not. That's the opportunity. Differentiating a brand from the competition based on things like customer service and an easy time of it at the checkout register is a traditional strategy in the retail industry. If Office Depot can offer something in that area, it should let me know about it. Since just about every retailer is struggling to keep the traffic coming into their chains, now is the time to exploit the other guy's weakened state and grab every customer possible.

Disclosure: I don't own any company mentioned; positions can change at any time.

Readers of this space know that, given the uncertainties regarding U.S. economic growth, household formation, and job creation, the retail sector is to be avoided. Still, there are exceptions -- particularly when the fundamentals suggest it's a decent time to get-ahead-of-the-pack with a company -- and with the aforementioned in mind, Staples is worth a review.

In general, analysts don't forecast anything spectacular about Staples, Inc. (Nasdaq: SPLS) FY 2009 North American retail sales, which should decline 1-3%

Still, there are bright spots that provide cause for hope: strong results from the North American delivery division's Chicago, Denver and Miami regions point to untapped domestic metropolitan area opportunities.

Further, margins should widen as SPLS's ramping private-label business comprises a larger percentage of sales.

Staples Inc. (NASDAQ: SPLS), a supplier of office products and a fierce competitor of both OfficeMax (NYSE: OMX) and Office Depot (NYSE: ODP), reported earnings for the fourth quarter yesterday. Excluding an extra calendar week, Staples saw its net sales rise by 8% to $5.3 billion and its diluted earnings per share rise by 15% to $0.47. For the full year, again excluding the extra week, net sales increased 9%; adjusted diluted earnings per share rose by 15%, coming in at $1.42. The full-year results included various adjustments related to tax issues, litigation, and stock compensation.

The numbers are okay, I suppose, but they don't necessarily make me want to jump into the stock. For one thing, same-store sales for North America declined 3% for the year (they did rise a modest 2% in Europe, however). For another, the stock is only yielding about 1.5% right now -- I'd wait for a bigger yield before thinking about Staples. Yes, it's true that the company increased its annual dividend by 14%, but I'll tell you something about that -- I am not a fan of annual dividends. I'd rather get my payout spread throughout the year.

Staples is a major brand in office supplies, and I do shop there. But nothing about this earnings report makes me want to check the retailer out any further, at least at this time. I'll have to see a few more quarters to see how the company handles the current economic malaise; for now, there are better ideas out there for one's investment dollars.

With the U.S. economic landscape becoming more uncertain, it's prudent to add a defensive stock or two to your portfolio, and with the aforementioned in mind Avery Dennison is worth an evaluation.

Avery Dennison Corporation (NYSE: AVY) is the leading global manufacturer of pressure-sensitive technology and self-adhesive solutions for consumer products and label systems, including office/school products, product identification and control systems, and specialty tapes and chemicals.

Analysts like AVY's office products/school products division, with a better-than-expected season seen for 2008. Further, AVY's international business is likely to continue to growth at a healthy rate in 2008-2009, on solid revenue gains in Europe, Asia, and Latin America. The Reuters FY 2008/FY 2009 EPS consensus estimates for AVY are $4.27 to $4.83.

A choppy, indecisive market requires a defensive play or two as a safety net, and a defensive stock worthy of consideration is Newell Rubbermaid (NYSE: NWL).

Newell Rubbermaid doesn't strictly fit the definition of a defensive stock, but its signature product, combined with its overall diversity in the consumer product space, make the stock a worthy consideration.

Newell Rubbermaid's signature product is the food storage container. At first glance, one could argue that U.S. shoppers will buy fewer of these containers as the U.S. economy slows, as it is, strictly speaking, a discretionary purchase. Still, we know from previous belt-tightening periods Americans tend to cut back on dining out. Undoubtedly that means more home prepared meals, and leftovers, which need containers -- a positive trend for Rubbermaid.

Generally, an investment strategy that focuses the total average annual return on equity over longer time periods tends to avoid an evaluation of companies that are about to or that have recently reported quarterly earnings. But there are exceptions, and International Paper (NYSE: IP) is one.

International Paper Friday reported unspectacular Q3 EPS of 57 cents compared to the Reuters consensus estimate of 57 cents. IP also reported Q3 revenue of $5.54 billion versus the Reuters consensus estimate of $5.36 billion. In other words, IP's performance barely met the Wall Street's expectations, and the Street was not overjoyed, with IP's shares declining 68 cents to $35.39 in Friday afternoon trading.

Still, the IP investment thesis remains largely intact. A restructuring has re-aligned its product mix and cut costs, while balance sheet improvements mean the company can more-quickly make investments in faster-growth regions. Further, while domestic free sheet (used in copiers, envelopes, forms) and linerboard (used in corrugated boxes) demand is expected to remain soft in 2008, international demand should grow at an acceptable rate.

Dell (NASDAQ: DELL) will begin selling its PCs in Staples (NASDAQ: SPLS) office supply stores as of November 11, according to both companies. The PC lineup will include Dell's Inspiron 530 desktop PCs and two versions of Inspiron notebooks, as well as supplemental Dell products like all-in-one printers and flat-panel LCD monitors.

Will this help Dell have a strong holiday sales push? Possibly, but it's doubtful.

Dell's deal with Wal-Mart (NYSE: WMT) was grand when it was announced, but since the company has given no specific performance figures on how well its retail effort in Wal-Mart has fared, it's hard to gauge how customers will react to Dell's brand in Staples. Does Staples even sell many PCs?

Dell systems in Wal-Mart stores reflected an aura of older or overstocked parts assembled into PCs and dumped into Wal-Mart's parking lot, rather than any specific computer build made for the retailer, and I'm not so sure customers have responded in droves to buy Dells inside those local Wal-Mart stores. Not enough time has gone by, though, so I could be jumping the gun here.

Dell's latest partnership will put its PCs and products into 1,400 more retail locations, which will instantly give it more exposure to the American buying public. Perhaps that is what Dell is going after here -- mass exposure (which brings a certain amount of purchases) instead of strategic, slower partnerships. Dell is expected to strike more retail agreements in the next 12 to 18 months, but not without challenges, according to Robert W. Baird analyst Daniel Renouard. Dell is now significantly behind competitor Hewlett-Packard (NYSE: HPQ) in overall computer system sales, and these retail efforts are considered by many to be a desperate attempt to win back market share. Right now, it's too early to attribute any success or failure in that effort.