A: The global conglomerate with diverse products such as Scotch tape, Post-It Notes, drug-delivery systems and roofing materials is feeling the pinch of competition.
IN THIS PACKAGE
- Boomers weigh merits of long-term-care policies
- Jitters afflict emerging market investors
- Investors can benefit from the weak dollar
- Target-date portfolios can miss their mark
- The savings game
- The Leckey file
- Getting started
- Spending smart
- Can they do that
- Taking stock
- Some stocks may provide shelter against downdrafts
- The week ahead
- Andrew Leckey
Jan. 13: Mattel's offerings are playing well in overseas markets
Jan. 6: Sun Microsystems remains a work in progress
- State Budgets
- 3M Co.
See more topics »
Chairman and Chief Executive George Buckley recently referred to the short-term period as "hand-to-hand combat." Yet he still believes rising overall sales of large-screen, high-quality TVs are positive for the firm's longer-term future.
Shares of 3M Co. (MMM) are up 4 percent this year following last year's 1 percent increase. Third-quarter income rose 7 percent primarily due to growth in its tape and adhesive businesses.
The weak dollar has been a plus because it makes 3M products less costly for international customers. The firm is expanding and diversifying its overseas business. It intends to invest several hundred million dollars over the next five years to double or triple its manufacturing capacity in China.
It expects to derive 63 percent of sales overseas this year, and it anticipates that will rise to 70 percent within five years to capitalize on markets growing faster than the U.S.
3M also has an aggressive acquisition program. In recent weeks it announced plans to acquire the coated-abrasives manufacturer Standard Abrasives, auto body repair products-maker Bondo Corp. and Poland-based grinding-wheel firm Unifam. The consensus rating on shares of 3M is mixed, according to Thomson Financial. That consists of three "strong buys," four "buys," eight "holds," one underperform and one "sell."
3M had volatile earnings last year because of a restructuring program that included the sale of its pharmaceutical business, extensive cost-cutting and an increase in capital spending for manufacturing.
The firm relies on its research laboratories to continually bring new products to market. The company also faces asbestos claims tied to its mask and respirator products sold in the 1950s and 1960s, with ultimate liabilities still unknown.
Earnings are expected to rise 11 percent this year compared to the 5 percent predicted for the conglomerate industry. Next year's forecast is for a 9 percent increase versus 13 percent industrywide. The five-year annualized growth rate projection of 11 percent compares to 13 percent for its peers.
Q: Tocqueville Fund was recommended to me. Can you tell me its strategy? -- M.C., via the Internet
A: It has a two-pronged contrarian strategy.
The first seeks blue-chip companies with temporary problems. It made successful bets on Cisco Systems Inc. and Juniper Networks Inc. in that category and added Kraft Foods Inc. this year.
The second finds opportunities in small-cap and mid-cap companies off the beaten path. An example there is Alaska Communications Systems Group Inc., the leader in the Alaskan cell phone market.
The $524 million Tocqueville Fund (TOCQX) achieved a total return of 10 percent over the past 12 months to rank in the upper one-fifth of large growth and value funds. Its three-year annualized return of 14 percent ranks in the top one-tenth of its peers.
"While some of the holdings take some time to play out, the manager has done a good job with this strategy," said Michael Herbst, analyst with Morningstar Inc. in Chicago. "His go-anywhere approach can be tricky for investors who want a fund that sticks to one area of the market, but it is a good core holding for those without such criteria."
Robert Kleinschmidt, lead manager since 1992, aims for a doubling of a stock's price over five years. He benefits from five other managers and four analysts who contribute ideas. Although the fund has experienced some volatility he generally limits the downside risk with a varied portfolio that makes no attempt to emulate the Standard & Poor's 500 index.
Toqueville Fund made it through the bear market more capably than many competitors. Kleinschmidt has a large chunk of his own net worth tied up in it and other Tocqueville family funds.
Industrial materials represent 21 percent of the fund's assets, with other significant concentrations in technology hardware, financial services and consumer goods. The top holdings were recently General Electric Co., Murphy Oil Corp., Newmont Mining Corp., Microsoft Corp., Cisco Systems, Schlumberger Ltd., CurrencyShares Japanese Yen Trust, Intel Corp., DuPont Co. and Pfizer Inc.
This "no-load" (no sales charge) fund requires a $1,000 minimum initial investment and has a 1.30 percent annual expense ratio.
Q: My 14-year-old grandson has earned several thousand dollars doing yardwork for neighbors. He wants to invest his savings in a stock or mutual fund. How should the investment be titled to minimize taxes? Should the investment be in his name or his parents'? -- B.B., via the Internet
A: The money your grandson made from work is taxed as his earned income.
If the money is invested in his parents' name it would be taxed at their presumably higher tax rate.
"The only reason to put it in the parents' name would be for parents to maintain control of the money," said Maggie Doedtman, a tax expert at H&R Block in Kansas City, Mo.
If the money is invested in your grandson's name the first $850 of investment earnings is tax-free and the next $850 is taxed at his tax rate. That rate is likely 10 percent for interest income and 5 percent for long-term capital gains and qualified dividends.
In tax year 2007 a child until age 18 can report $1,700 of passive investment income before triggering his parents' tax rate. The "kiddie" tax that kicks in is designed to keep parents from shifting investment wealth to their children's more advantageous tax rates.
Andrew Leckey is a Tribune Media Services columnist. E-mail him at email@example.com.