If you told me back in July that the price of oil would fall by $7 per barrel in one day in September, I would’ve told you that the Dow would probably go up 500-pts. Well, oil fell by $7 per barrel yesterday, and we all know what happened… the Dow fell 500-points.
It looks Wall Street has a bigger wall of worry to climb, namely the entire U.S. financial system. Fannie Mae (FNM), Freddie Mac (FRE), Bear Stearns (BSC-X), Lehman Brothers (LEH)… all gone.
With Merrill Lynch (MER) now becoming part of Bank of America (BAC), you are probably asking, “Who’s next?”
Will it be AIG, a major Dow component, Washington Mutual (WM) or Wachovia (WB)? In the meantime, I recommend you head for cover!
Safety and diversification are two of my favorite words during times of economic turmoil. Actually the two words go hand-in-hand, for diversification yields safety. And believe it or not, there are a number of stocks that offer you the combination of the two and offer comfort during difficult times like these.
Invest Soundly with 3M
One of my favorite safety stocks through the years has been 3M Company (MMM), a diversified technology company that operates in six different business segments. Its products range from decidedly low-tech office products to high-tech drug delivery systems and a myriad of products in-between. The company is widely acknowledged as a leader in product innovation and in getting those products from the drawing board to the market (see also, “Dell: The Next Generation Growth Story“).
We all know that diversification alone won’t prevent… > a stock from declining. But it does provide a certain level of safety that’s attractive. For 3M, the 55,000 products it sells should allow you to sleep well at night.
In any downturn the company’s healthcare products will still see robust demand. Also 3M makes a ton of stuff for use around the house or in the office such as Scotch Tape and its popular Post-It Notes.
While a strengthening dollar will hurt top-line results (since 3M derives a healthy portion of its sales from overseas) the international marketplace is exactly where the growth comes from over the next 10 years.
3M has also been making acquisitions to further diversify its product offerings. It recently acquired a maker of car care products, a Swiss company that makes filtration products for the pharmaceutical and biotech markets, and a company that makes environmental monitoring equipment and a company that specializes in making foam adhesive products for the building industry.
In addition to this buying binge, 3M just announced that it’s launching a renewable energy unit, specifically targeting the wind and solar markets, with solar representing “a quite massive opportunity for 3M,” according to chief executive George Buckley. That market is expected to grow to $50 billion by 2012 from $20 billion in 2008 (see also, “Alternative Energy Stocks: The Surge for Solar“).
3M looks like a good bet for the long-term. It also looks like a safe-haven in the short-term as well, offering some upside potential, along with a small dividend. The shares are down some 20% this year and trade for about 12 times forward earnings. That’s quite a low valuation for a large, financially stable company.
This article was written by Jamie Dlugosch, contributor to InvestorPlace.com. For more actionable insight likes this, go to: www.InvestorPlace.com.
