Five-Star Conglomerates: 3M

Formerly known as Minnesota Mining & Manufacturing, 3M (NYSE: MMM  ) is an industrial conglomerate that makes everything from Post-it notepads to pre-op skin prep solutions. This mmm-mmm-mmm-good company has generated a significant following on Motley Fool CAPS, our investor intelligence community.

Despite its storied heritage of product innovation, in recent years 3M hasn't quite produced the eye-popping returns -- or inventions -- for which it's famous. After decades of marching steadily higher, 3M's stock has inched ahead by only 10% over the last two years. It's not easy being a multi-disciplined company, as fellow conglomerates General Electric (NYSE: GE  ) and United Technologies (NYSE: UTX  ) have discovered. All three lag the market over the past year.

CAPS Take
Nearly 1,600 professional and novice investors on CAPS believe that 3M will overwhelmingly outperform the market. More than a quarter of those bullish investors are considered All-Stars, the cream of the CAPS crop.

Top-rated CAPS competitor gtowings, who outranks 99.82% of all other players, believes that 3M will succeed through consistency:

A fine third quarter dispelled the gloom over the shares of this fabulously diverse company. The stock had been whacked in July on news of lower-than-hoped-for sales in optical films, which are used in LCD flat-screen TVs and desktop monitors. The optical business is recovering, and the rest of 3M continues to steer a steady course.

Consumers, who know 3M through Scotch tape and Post-it Notes, hold the comany in high regard. But investors have been lukewarm. For that, blame investor disdain for blue chips and not failures at 3M, which is a reliable producer of double-digit earnings gains. The shares trade at 16 times 2007 earnings estimates, well below their historical levels. If the global economy continues to grow, there's no reason 3M can't trade at $95 in the coming year.

And pencils2, another CAPS All-Star with a 99.69% player rating -- all the more remarkable because this investor is just 14 years old! -- has the appropriate long-term outlook when investing in companies that have an earnings miss.

3M has been [beaten] down over the past few months because of a disappointing quarter (to analysts). But think about it. Why make a huge fuss over one quarter of a company that has been around for more than 100 years, shown great results over that time, and for maybe 3-6 months a little slow-down in sales, the stock gets hammered. 3M won't be affected by this in the long-term, which is the thing to look at. The short-term results aren't the things to pay attention to for a company such as 3M. The sell-off has been overdone, and in the long-term the stock will recover.

My take
How can I argue about 3M with a 14-year-old who's trouncing me on CAPS? This Motley Fool Inside Value recommendation has been going through fits and starts as it tries to wriggle out from the tight strictures of the Six Sigma programs put in place by former CEO James McNerny, before he left for Boeing (NYSE: BA  ) . Current CEO George Buckley is trying to revive the culture of innovation that made 3M famous, a spirit that now energizes the corporate cultures of many other companies, including Google (Nasdaq: GOOG  ) . Valued at just 15 times current earnings, 3M still has room to grow. Put it on a sticky note to remember it!

Your take
Do you agree with our CAPS community? Is 3M stick-to-the-ribs good, or has it missed its chance to innovate? Make your voice heard and let us know.

We're stuck on further Foolishness:

3M is a recommendation of Motley Fool Inside Value. A 30-day free trial subscription gives your portfolio the Thinsulating warmth of a greater margin of safety.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool's disclosure policy sticks with you through thick and thin.


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