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.
Further, assuming an early economic expansion high of about $110, the current time undoubtedly represents the last to establish a position and earn an outsized gain with 3M in the immediate years ahead. The First Call FY2009/FY2010 EPS estimates for MMM are $4.57 to $4.87.
Finally, the Sell/Stop Loss has been raised to $48, or to just below cost, from $32.
Stock Analysis: 3M Co. is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in MMM now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your MMM position before December 2009. Sell/Stop Loss if you were to buy shares in this company: $48.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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