Investors are being encouraged to consider buying 3M Co. stock despite its recent struggles. The stock has undergone a significant drop in the past six years, falling as the broader S&P 500 index gained. The company is currently facing legal challenges, including a $16 billion settlement for two lawsuits, and there is speculation about a potential dividend cut. However, contrarian investors believe that times like these, when a stock is facing challenges, can be the best time to buy.
3M’s main strength lies in its brand loyalty, with a wide range of products under popular labels such as Scotch, Post-It, and Filtrete. The company’s diverse product portfolio has made it difficult for Wall Street to value, leading to skepticism from investors. However, the company’s free cash flow remains healthy, indicating its profitability potential. Despite challenges faced during the pandemic, the return to office work has started to impact 3M’s financials positively.
In an effort to address its legal issues, 3M settled two lawsuits last year and is financially equipped to handle the costs associated with these settlements. Investors are often overly focused on legal woes, much like the situation with drug distributor AmeriSource in the past. The recent spinoff of 3M’s medical-devices business is expected to streamline the company and boost its cash flow. Despite these positive developments, 3M’s stock is currently trading at a discount compared to its historical average, presenting an opportunity for value investors.
The uncertainty surrounding 3M’s dividend payout is a key factor holding back potential buyers. However, some believe that a dividend cut has already been factored into the stock price, and any future cut may be a one-time event. Investors are advised to closely monitor the company’s dividend moves and wait for the right opportunity to buy the stock. Once the spinoff dust settles and management clarifies its dividend strategy, a buy call may be issued for interested investors.
Overall, despite the challenges and uncertainties facing 3M Co., some investors see potential in the company’s turnaround. With a strong brand loyalty, healthy free cash flow, and efforts to address legal issues, 3M has the potential to rebound from its current struggles. By carefully monitoring the stock and waiting for the right opportunity, investors may find a promising investment opportunity in 3M Co. Brett Owens, Chief Investment Strategist for Contrarian Outlook, believes that keeping a close eye on the stock’s developments could lead to a profitable investment in the future.
