Companies start to believe their own PR hype. Investors push a stock past logical limits. A company seems about to break down or break out. These are just a few things that can signal a stock with attitude. And... that attitude can be good or bad for the stock price, since attitude always catches up with reality. At least on Wall Street, that is.3M Corp. (NYSE:MMM) was up yesterday $1.84 (2.47%) to close at $76.43 on almost twice its average average daily volume. Investors snapped up shares in a generally strong trading day while the company announced a $7 billion two-year stock buy-back program. This is the largest in 3M's history. When a company likes its own stock maybe investors should too.
3M has taken shareholders on a roller coaster ride for the last year and technicals for the stock have been negative lately. MMM has a cautious S&P 3 STAR (out of 5) hold rating with a 12-month price target of $83. Out of the 10 other analysts who cover the stock, six give it a strong buy and four give it a hold. With no sell ratings, analysts seem positive on the stock.3M's stock worked its way up to a a high of $88.35 on May 8, 2006, then dropped 24.1% to $67.05 on July 25, 2006. The stock is now about 14% above its 52-week low. With a stock buy-back in progress the trend could continue upward.
Other heavy manufacturing/materials companies like DuPont (NYSE:DD), Dow Chemical Co. (NYSE:DOW), United Technologies Corp. (NYSE:UTX), and General Electric Co. (NYSE:GE) all appeared to benefit from investors renewed interest in the sector. And rumors of a possible Alcoa Inc. (NYSE:AA) takeover offer may have further encouraged investors.
For a neutral hedged play on MMM, I would consider a July covered call at the $75 level. There is even a dividend on the stock with a 2.5% annual yield. Vic Schiller is an analyst with attitude at Investors Observer. (Free Subscription)
DISCLOSURE NOTE: Mr. Schiller owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about.
Will Rich Ross really have a positive impact on Disney's movie operations?
Consumers sick of recession, may spend extra on holidays
Corrections, seasonality and Santa Claus
