The last time I weighed in on 3M (NYSE:MMM) stock, I noted it was another “blood in the streets” opportunity. At the time, it traded at double-bottom support at $144.44 and even had the support of President Donald Trump’s administration.
In fact, the administration announced plans to source millions of masks from 3M to help combat the virus threat. As Vice President Mike Pence said in a press conference, “We’re going to make sure and protect the health of our healthcare providers. As the President said, we have more than 40 million masks available today. Thirty-five million more masks per month will be produced, and we’re also going to be working with other manufacturers.”
And yet, it wasn’t enough to push 3M highs.
Instead, coronavirus fears sent MMM stock to under $120, and even now it’s only back to about $145. I’d actually use this as an opportunity to accumulate the stock. With patience, I’m confident it’ll refill its bearish gap to around $180, making it a great longer-term investment.
President Trump Sent 3M Lower
President Trump slammed 3M over its production of protective masks and invoked the Defense Production Act directing Homeland Security Secretary Chad Wolf to “use any and all authority available under the Act to acquire, from any appropriate subsidiary or affiliate of 3M Company, the number of N-95 respirators that the Administrator determines to be appropriate.”
Trump also tweeted, “We hit 3M hard today after seeing what they were doing with their Masks. “P Act” all the way. Big surprise to many in government as to what they were doing – will have a big price to pay.”
3M CEO Mike Roman Fired Back at the White House
However, 3M CEO Mike Roman pushed back and called Trump’s suggestion “absurd” and said that “the idea that 3M is not doing all it can to fight price gouging and unauthorized reselling is absurd. The idea that we’re not doing everything we can to maximize deliveries of respirators in our home country — nothing is further from the truth.”
The company has also noted, “Global demand for supplies used to treat and help protect people, such as respirators, is currently exceeding supply. 3M expects demand for respirators to outpace supply for the foreseeable future. 3M is ramping up production at its manufacturing facilities around the world including in the U.S., Asia, and Europe as quickly as possible.”
Unfortunately, product demand hasn’t been reflected in the stock just yet.
That’s because there’s substantial fear that we’re already knee-deep in a recession. That being the case, industrial stocks like 3M tend to underperform, as we’ve seen in prior contractions.
The Bottom Line on MMM Stock
At the same time, we have to consider a good deal of fear has been priced into the 3M stock, and the overall market. Once the coronavirus fades, and some sort of normalcy returns to the economy and market, oversold stocks like 3M will be picked up at bargain basement prices.
For me, it’s tough to ignore 3M at triple-bottom support dating back to late 2015. With plenty of patience, I strongly believe 3M can refill its bearish gap around $180 a share. Use the pullback as a reason to “set it and forget it,” meaning buy the blood in the streets, forget about it and check back in a few months.
Ian Cooper, a contributor to InvestorPlace.com, has been analyzing stocks and options for web-based advisories since 1999. As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.
