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Stock of the Week: 3M

How a legion of engineers delivers ‘economies of scope’.

Andrew Willis 25 April, 2022 | 4:28AM
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Andrew Willis: Perhaps you know 3M (MMM) best for sticky notes, removable adhesive strips or scotch tape, but that’s just the tip of the iceberg. And when you have a team of engineers improving everyday objects down to their basic elements, the possibilities are endless.

Investors and those familiar know that (almost) all of the products that come out of the company are just… better. It’s able to consistently charge a premium of up 30% relative to the market, and apply that premium to an ever-widening array of products, as senior analyst Joshua Aguilar notes.

This innovation powerhouse can apply its technology to multiple uses, as well as deploy its highly effective R&D efforts, earning it economies of scope – in addition to a wide moat. Moreover, we note that 3M's yield on research investments is quantifiably superior to competitors. We believe the company can capitalize on a stable and ever-growing healthcare and PPE market, where the quality of products is key.

With a wide portfolio of products, however, often come product liability and litigation risks – which are critical ESG risks for investors to consider. The market did, although we believe discounted the stock too much, especially as this value name is well-positioned to serve high-growth segments.

For Morningstar, I’m Andrew Willis.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
3M Co113.22 USD2.46Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar.ca. He previously produced content for Fidelity Investments and finance events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @AndrewWillisCDN.

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