3 Ways to Jump-Start 3M Stock
May 30th 2013 1:15PM
Updated May 30th 2013 2:10PM
3M used to be known as a growth stock and a company that was frequently among the most innovative in the world. But some of that shine has worn off in recent years and the company may have to make some big moves to boost growth and become more than just a dividend stock.
These are three of the ways I think 3M can excite both consumers and investors again but they'll require changes at this entrenched company.
Bet big on emerging industries
3M has never been known as a company who makes big bets on specific industries but it could benefit if it did. If we look at another Dow giant we can see that General Electric has been very successful in spotting emerging trends and buying up assets to take advantage.
GE got into wind turbines and helped the industry explode, built GE Capital to help finance its own sales, and has spent $11 billion in acquisitions in oil and gas since 2007 in an effort to get exposure to a high demand industry.
3M could learn a few things from GE's success because most of 3M's businesses are cobbled together, whereas GE has full-service offerings. One emerging market that's a perfect fit for 3M is the solar industry. 3M already makes high value products for the industry but the company has chosen to be a bit player instead of being a module manufacturer or technology developer. There are few companies with the R&D muscle and strong balance sheet to win in solar, but 3M is one of those companies if it would be willing to make a big bet on this emerging industry.
3M has some of the best RFID technology in the industry but few people know about its applications. Here's another area 3M could play a leading role.
One of 3M's latest products to turn heads is an LED light bulb that can last 25 years. But will 3M make a big enough bet to challenge GE and other established players? I doubt it. 3M has the R&D power to make these incredible products but rarely puts its weight behind taking major share in emerging industries.
Give up on no-growth businesses
How much longer will 3M be investing in the library systems business? It seems like every week the company is introducing a new or improved product for library services, meanwhile Amazon and Apple are making it easier to get books electronically.
The company is still investing in commercial cleaning, overhead projectors, fly fishing, insect repellant, and golf gloves just to name a few businesses 3M could jettison. These aren't businesses 3M will ever dominate and they don't add to the brand or the company's technology advantages.
Improve brand awareness
Did you know that 3M makes window film for cars and homes that can reduce UV and IR rays that heat up an area, and even offers break-resistant protection? You probably didn't because 3M does a terrible job promoting some of the most incredible products it offers, but I can personally attest that these are top notch products that would be hits if more people knew about them.
Meanwhile, the products people do know are split across a dozen brands that generate little cross-branding. Post-It Notes, Scotch, Scotch-Brite, Nexcare, Filtrete, Command, and Scotchgard are just a few of the 3M brands that can be found in your local Target or Wal-Mart. Most buyers probably don't know that all of these brands come from 3M so there's no ability to cross-sell as good experience with one product into another.
Take Nexcare bandages as an example. You may have a great experience with ScotchBlue painting tape and Post-It Notes but that positive experience doesn't naturally lend itself to trying Nexcare bandages. 3M is missing an opportunity to demonstrate quality products that people know like painter's tape or Post-Its and leverage that into selling other products people are less aware of like Nexcare and Command.
3M has too many brands and doesn't spend enough money making people aware of what it does sell. If the company improves its marketing I think brand awareness would rise and so would sales.
Take a deeper look into 3M stock
With over 50,000 products, 3M plays a role in making everything from computers to power cables. A long history of invention and innovation has driven the company to its wide reach, but a focus on operational efficiency may be hurting the creative culture that once created Scotch Tape and the Post-it note. A new leader has taken over and vows to return innovation to the forefront. Does this mean the stock will become more than a dividend, returning to its former glory as a growth stock once again? Find out whether 3M has what it takes to pull it off in The Motley Fool's comprehensive new research report on the company. Simply click here now to claim your copy today.
The article 3 Ways to Jump-Start 3M Stock originally appeared on Fool.com.Fool contributor Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends 3M. The Motley Fool owns shares of General Electric Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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