Our Timely Ten portfolio represents our top ten current recommendations among Undervalued stocks; here we look at two new entrants to this list, explains Kelley Wright, editor of Investment Quality Trends — and a participant at the MoneyShow Las Vegas, Sept. 12-14. Learn more here.
3M Company (MMM) is a global manufacturer operating in four reportable segments: Safety & Industrial; Transportation & Electronics; Health Care; and Consumer.
Most 3M products involve expertise in product development, manufacturing, and marketing, with many of the company’s products involving some form of coating, sealant, adhesive, film, or chemical additive that increases the product’s overall functionality and useability for customers.
Important end markets for Safety & Industrial include global manufacturing and electrical utilities. Utility customers have historically mitigated 3M’s more cyclical industrial customer base during recessions.
This segment also produces N95 respirators, which have seen a surge in demand amid global shortages during the Covid-19 pandemic.
The Transportation & Electronics segment include components and products that are used in the manufacture, repair, and maintenance of automotive, marine, aircraft, and specialty vehicles.
The Health Care segment produces a variety of medical and surgical supplies, infection prevention, pharmaceutical, drug delivery systems, dental, personal care and other products and systems. The Consumer segment serves markets that include consumer retail, office retail, home improvement, and building maintenance.
Historically 3M has maintained a highly conservative balance sheet, and it has a history of relatively modest earnings decline during recessions, with 2009 operating earnings falling only 3% vs. 2007 pre-recession levels, and 2020 operating earnings flat vs. 2019 despite the 2020 pandemic recession. Given this history of modest or no earnings decline through recessions 3M has low leverage risk.
AbbVie Inc. (ABBV) is a global, research-based biopharmaceutical company that develops and markets advanced therapies that address some of the world’s most complex and serious diseases.
Products fall into the following major categories: immunology, which includes rheumatology, gastroenterology, and dermatology; oncology, including blood cancers; neurological disorders, such as Parkinson’s disease and migraine; eye care; women’s health products; and other, which includes treatments for hepatitis C and metabolic diseases.
ABBV’s largest and most successful drug is Humira, which is approved to treat 14 autoimmune diseases in the U.S., Canada, Mexico, and in the European Union. Humira will encounter biosimilar competition in the US beginning in 2023, which in part prompted the acquisition of Allergan Plc in 2020.
This acquisition added a large portfolio of branded pharmaceutical, device, biologic, surgical, and regenerative medicine products to its portfolio.
Allergan’s products focused on four key therapeutic areas, including medical aesthetics, eye care, central nervous system, and gastroenterology. Its best-known drug is Botox, which is a cash cow as it is not covered by insurance.
ABBV has more than 90 compounds or indications in clinical development, with a focus on immunology, oncology, aesthetics, eye care, neuroscience, and women’s health, along with targeted investments in cystic fibrosis. Of ABBV’s programs, approximately 50 are in mid- or late-stage development.