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At any given time, conservative growth investors will have a hard time finding a better stock to buy than 3M Co. (NYSE:MMM). It is a great technology company, and deserves a place in every growth investor’s portfolio.
Over the past 20 years this household name is up sixfold. Over the past decade, the stock is up 115%. Over the past five years, since the bottom of the recession? A very nice 182%. And don’t forget, there have been dividend payments along the way as well.
I’m sure you have a roll of 3M tape somewhere in your house and a 3M “Post It” notepad next to your phone. The company makes thousands of products, from adhesives and films to medical supplies. This company does it all, and it does it very well all around the world.
The backbone of 3M’s business is its R&D department. R&D typically spends the equivalent of 5% to 6% of the company’s total revenues inventing new products and making improvements to existing ones.
3M was issued its 100,000th patent in May. You may never look at that roll of 3M tape in the same light again! Innovation is at this company’s core, which is why it’s been awarded so many patents since 1924.
But this household isn’t all about innovation…conservative management also means reliable profits and cash flow.
Over the last decade – mind you this includes the 2008-2009 recession — MMM has grown revenues at an average annual rate of 5.4% and net income at 6.8%. For a company that generated over $30 billion in sales last year, this is no small accomplishment.
Management is always considering selling slower growth businesses so it can maintain high-single-digit revenue growth over the long term. This is a good thing. Such discipline means the company is a cash cow, able to return money to shareholders in the form of stock buybacks and dividends (current yield is 2.5%).
It is true that a picture is worth a thousand words, or in the case of the chart below, 20 years. Notice the steady uptrend? That’s the result of year-in, year-out performance. Sure, there have been some bumps in the road, but MMM has gotten right back on track time and time again.
This isn’t a stock that’s going to surge 10% overnight. But it’s equally unlikely to drop 10% overnight, either. It’s a true “forever” stock that every growth investor can own.
So make sure you do. Buy some now, and buy a little more every few months.
How the iPhone 6 unveiling impacts mobile
Tim Cook wrote, “iPhone 6 and iPhone 6 Plus — which are the biggest advancements in iPhone history…” after unveiling the most technologically advanced phone on the planet with cautious estimates have them selling 200 million of them. While we love Apple, we’re recommending a much less known company today…a company no one is talking about. A company that provides the technology, without which, smartphones couldn’t exist.