With all of the recent selling, we as value investors can get excited about more opportunities to buy good companies at discounted prices.
One of those opportunities may be available right now.
The company and opportunity is multi-industrial giant 3M (MMM), which has fallen from a March all-time high of $170.50 to prices around $140.
While the company is currently feeling the impact of the uncertain global economy as well as the strong dollar, each of 3M’s business segments saw organic growth in the last quarter. The only exception was the company’s energy and electronics business — which was facing difficult comparisons from double-digit gains last year — and management expects to see improved results in the second half of the year.
At its current prices, 3M stock will benefit nicely should the recent selling and economic concerns prove to be overblown.
But even if they don’t, the 3M stock is still well positioned to withstand any further economic uncertainty given the company’s strong balance sheet and 20%+ operating margins.
And on top of that, the shares will also be supported by both a nice 2.7% dividend yield and the company’s ongoing share buyback program, which creates shareholder value by reducing the number of shares available (average share count was down 3% last quarter).
Buy MMM under $142 for a $160 target, which would take the stock from a current valuation of 16.3X 2016 EPS estimates of $8.60 to a still reasonable 18.5X.
