3M Stumbles, And The Knives Come Out

If 3M (MMM) had in fact been benefiting from the unwind of General Electric (NYSE:GE) as the go-to multi-industrial name and a change in perception that it was no longer so sensitive to short-cycle movements, a lot of that has unwound since late January. 3M still has quite a lot of exposure to sectors like autos and electronics, not to mention "general industrial", and investors are increasingly worried that those businesses are now past their peaks. Add in growing worries about margin leverage, 3M's inability to cover input cost inflation, and a high valuation, and institutional shareholders are scrambling for the exits.

As I wrote in prior articles on 3M, the shares got too high on overheated enthusiasm about the economic cycle, and there is definitely a risk that perception will overcorrect in the other direction. 3M isn't yet at an obviously cheap level yet, though the shares are getting back to a high single-digit long-term implied return, provided that mid-single-digit FCF growth remains a valid long-term assumption.

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3M Stumbles, And The Knives Come Out