A common scene in Asian metropolises, the face mask in the U.S. is mostly associated with industrial or professional use. But suddenly, this rather mundane accessory has been flying off the shelves due to the coronavirus from China. In theory, this bolsters the bullish argument for companies like 3M (NYSE:MMM) and Honeywell (NYSE:HON), which manufacture the now-ubiquitous N95 mask. However, the narrative for MMM stock is a tricky one.
On the positive end of the spectrum, I don’t recall a time when 3M has been this exciting. Admittedly, it’s for dubious and increasingly tragic reasons. However, 3M has been a troubled investment since peaking in early 2018. With investors increasingly shifting their focus on the sexy plays of digitalization and cloud computing, 3M has simply lost relevance.
It’s not something that I agree with, as I’ll explain later. However, the markets are always right, and so far, they’ve not been favorable for MMM stock.
Another potential catalyst for shares is a recent development. With the N95 masks flying off the shelves, an alarmingly few people now have access to them. And that’s especially the case for medical professionals.
In a bid to remedy this situation, Vice President Mike Pence met with 3M’s CEO, Mike Roman. Following the conference, which included Minnesota Governor Tim Walz (3M is headquartered in Saint Paul, Minnesota), Pence made a general statement that medical professionals will have access to the masks in question.
As a piece of much-needed upbeat PR, the federal government’s overture is a net positive for MMM stock. Still, others are skeptical because 3M is more than a mask company. The coronavirus can’t support this company, can it?
The Unintuitive Case for MMM Stock
Ordinarily, you wouldn’t want to buy shares of a publicly traded company solely on the basis of an outbreak. Once the outbreak fades — as all of them invariably do — the bullishness for that stock could quickly collapse. Naturally, the same general risk applies for 3M. However, the coronavirus imposes an interesting twist.
First, let’s discuss the ridiculous infection rate of this virus. About two weeks ago, South Korea, Iran and Italy didn’t really figure into the pandemic. Now, these three nations are the worst-hit countries outside of China, with a combined total of 16,150 cases.
Therefore, it’s not inconceivable that the coronavirus could stick around for a lot longer than experts anticipate. Another example is the U.S., which started off with a handful of cases but has since escalated to over 300. That would imply a further and unexpected revenue lift for 3M.
Second and more importantly, face masks may be more protective than you might think. While the Surgeon General urged the public not to buy them, most folks aren’t listening. No matter what, they provide an acute, physical barrier against liquid transmission (think splatter from a sneeze) in tight quarters.
Recently, I had a conversation about the mask craze with my dad. He brought up a great point, which was that masks, which may not prevent airborne virus transmissions, help prevent wearers from touching their faces.
Curious, I checked some stats. From a Washington Post report, I learned that, on average, people touch their faces two dozen times an hour. Further, 44% of that contact involves the eyes, nose or mouth.
Whether directly or indirectly, masks do help. Therefore, it’s really a matter of national security that 3M ramp up production. Obviously, that’s huge for MMM stock.
Perhaps a Lasting Societal Change
Finally, I have one last rebuttal about the coronavirus being a fleeting catalyst. Yes, the coronavirus will some day fade, but this crisis could change our collective minds about China and globalization.
Currently, China owns the vast majority of the supply chain for vital antibiotics and over-the-counter medicines. Since the coronavirus has no cure, we must rely on standard anti-flu medecine to heal ourselves. Logically, this puts a lot of power into China’s hands.
Make no mistake: China is our adversary and the biggest threat to global stability. In fact, many experts feared before the coronavirus hit that China could use its medicinal supply chain dominance as a political weapon. And again, before this crisis, many U.S. officials believed that our nation was “woefully unprepared to address even minor disruptions in the supply of these drugs.”
Are you seeing the picture clearly now? Pence’s visit with 3M reasserted the true importance of President Trump’s “America First” campaign battle cry. Globalization is awesome so long as dangerous people, ideas or viruses don’t invade and disrupt our civilization.
Specifically, the coronavirus taught us that we cannot outsource our manufacturing base to adversarial nations. While an outbreak won’t permanently change MMM stock, the return of economic and political sanity might.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he did not hold a position in any of the aforementioned securities.
