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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

3M’s bottom line is strong and the future looks bright

Universal Press Syndicate

In today’s roller coaster market, renewed attention to some of the bigger, stronger U.S.-based companies that are bringing home the bacon from around the world is warranted.

For example, look at giant 3M (NYSE: MMM), which sells products in many different areas: Post-it notes, medical wraps, optical films, dental and orthodontic products, and even roofing granules. And as CEO George Buckley told an investor group just last week, “Our core businesses are strong and getting stronger.”

For investors, 3M has nearly a $50 billion market cap while selling at a forward P/E of less than 12 times earnings. Its return on equity approaches 33 percent, and it sports nearly a 3 percent dividend yield. Nevertheless, its shares have slid more than 20 percent in the past year.

It has recently been in an acquisition mode, picking up a manufacturer of car care products, a maker of dental implants and radiology equipment, an environmental monitoring equipment company, and a Swiss manufacturer of pharmaceutical and biotech filtration systems. Beyond that, 3M is launching a renewable energy unit that’ll target wind and solar power.

If it can integrate all those products as well as it has in the past, while continuing to research and develop new products, its return on equity should stay steady. For equity investors, 3M could stand for “make more money.”

Ask the Fool

Q: What are “frontier” funds? – J.V., Sacramento, Calif.

A: They’re mutual funds focused on investing in certain parts of the world. You’ve probably heard of “emerging markets.” Well, emerging markets funds these days are typically heavily invested in companies in Brazil, Russia, India and China (sometimes referred to as “BRIC” countries). Those are rapidly growing economies, unlike the slower and steadier economies of the more developed world (think Japan, Europe and the U.S.).

For those who’d like their portfolios exposed to countries that are not quite as developed as the BRIC ones, enter the newfangled frontier funds. They’re invested in smaller, often riskier economies, such as Qatar, Lebanon, Poland, Peru, Kazakhstan and Namibia.

Be careful with these funds – they tend to charge relatively high fees, and they’re likely to be rather volatile. Many of the nations they’re invested in aren’t too stable, after all.

Q: How much personal liability insurance do I need? – D.E., Columbus, Ind.

A: To answer that question, ask yourself how much you have to lose if you’re sued. Add up the value of your home, your belongings and your financial assets. Tack on some more for the cost of legal defense. (In some cases, your insurance company might provide a lawyer.) You want to be sure that a lawsuit won’t wipe you out or cause severe financial strain.

If your total assets are substantial, ask your insurance company about an “umbrella” personal liability policy. They’re critical for more and more of us these days. Umbrella policies generally offer much more liability coverage ($1 million or more) at much lower premiums than individual policies such as homeowner’s, renter’s and automobile insurance. Learn much more at www.fool.com/insurancecenter and www.iii.org.

My dumbest investment

About 10 years ago, I invested $10,000 in a software company. I was told by the salesman that the stock was not listed on any market but would be going public in one or two years. Supposedly, I could sell it at that time and more than likely make a profit. Well, the company is still in business, but it’s still not public. I can’t sell this stock or write it off on our taxes. All I think about is the interest that $10,000 would have earned in 10 years. – Ron W., Holiday, Fla.

The Fool Responds: You’re right – even if you averaged a measly 1 percent annual interest rate, you would have made more than a thousand dollars! It’s risky to invest in companies that are not yet public, because even though they may plan to have an IPO (initial public offering) in the near future, it might get postponed for a long time. Few companies, for example, want to issue their initial shares in a shaky or falling market. Beware of new IPOs, too, as they can be volatile and risky.