{"id":39844,"date":"2013-07-10T13:54:42","date_gmt":"2013-07-10T17:54:42","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=39844"},"modified":"2013-07-10T13:54:42","modified_gmt":"2013-07-10T17:54:42","slug":"mmm-the-beauty-of-boring","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/07\/10\/mmm-the-beauty-of-boring\/","title":{"rendered":"MMM: The Beauty of Boring"},"content":{"rendered":"

By The Sizemore Letter<\/u><\/a> <\/p>\n

3M ($<\/span>MMM<\/a>)<\/b> is a homely company.\u00a0 There is nothing sexy about scotch tape or Post-It notes.\u00a0 Or Ace bandages or Scotch Bright for that matter.\u00a0 We\u2019re talking about adhesives and cleaning supplies, for crying out loud. \u00a0No matter how hard you try, there is no way to make these items anything other than boring.<\/p>\n

And as an investor, I\u2019m ok with that.<\/p>\n

Men are notorious for letting a beautiful woman impair their judgment.\u00a0 But the same is true of beautiful stocks.\u00a0 Think of recent \u201cattractive\u201d stocks that have led many an investor to ruin: Apple ($<\/span>AAPL<\/a>) <\/b>and Facebook ($<\/span>FB<\/a>)<\/b> are two that come to mind.\u00a0 Like a glamorous date, it\u2019s nice to be seen in public with an \u201cit\u201d stock.\u00a0 But chances are good it won\u2019t be good for your wallet or for your long-term peace of mind.<\/p>\n

\"MMM\"<\/a><\/p>\n

This is not a stock you will ever brag about owning at a cocktail party.\u00a0 But frankly, you should.\u00a0 The stock has quietly pushed to new all-time highs, and it is beating the S&P 500 by a wide margin year to date.<\/p>\n

\u00a0\"chart<\/a><\/p>\n

But while 3M\u2019s stock price performance has been spectacular, I\u2019m more interested in the business and its consistency.\u00a0 \u00a03M does quite a bit more than tape and sticky notes.\u00a0 They make everything from the reflective films that cover traffic signs to insulation for airplanes. \u00a0But all of their products have a couple things in common:<\/p>\n

    \n
  1. They perform their functions behind the scenes and are hardly ever noticed by anyone except the user. (Last time you were on your friend\u2019s boat at the lake, did you ever stop to wonder what brand of sealant they used?\u00a0 Yeah, me neither.)<\/li>\n
  2. They are the sorts of products that tend to get used up and need to be frequently replaced.<\/li>\n
  3. When you need them, you need them.\u00a0 Whether it\u2019s an ankle brace or flame-retardant film, demand for 3M\u2019s products is generally pretty inflexible.<\/li>\n<\/ol>\n

    Like all companies, 3M has some amount of sensitivity to the business cycle. If a company is shedding headcount in a bad economy, it\u2019s probably not stocking up on office supplies.\u00a0 But 3M\u2019s revenues are remarkably consistent, and other than a brief blip in 2009, the company sailed through the crisis and its aftermath with barely a scratch.<\/p>\n

    3M\u2019s consistency is also shown in its dividend payments.\u00a0 The company has continuously paid a dividend for 97 years, and it has increased its dividend every year since 1959.<\/strong>\u00a0 Its current dividend yield of 2.3% may not be extraordinary, but the dividend has doubled since 2002.\u00a0 Had you bought 3M in 2002, you\u2019d be enjoying a yield on your original investment of about 5%.\u00a0 Again, not extraordinary, but not half bad either.<\/p>\n

    3M will never double your money in a year, and you\u2019re certainly not going to get rich quick owning it.\u00a0 But it\u2019s one of those stable, consistent holdings that will quietly chug along, throwing off dividends, and never give you trouble.<\/p>\n

    If bought at a reasonable price, it\u2019s also a stock that would be difficult to lose money owning over any reasonable time horizon.\u00a0 And at 15 times expected earnings, I would say its pricing is anything if not reasonable.<\/p>\n

    Disclosures: Sizemore Capital has no positions in any stocks mentioned.<\/p>\n

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