Newspaper article Sarasota Herald Tribune

Long a Matador to the Bulls, 3M Has Returned to the Arena

Newspaper article Sarasota Herald Tribune

Long a Matador to the Bulls, 3M Has Returned to the Arena

Article excerpt

According to Barron's, portfolio managers are urging clients to become more risk-tolerant and subsequently more open to equity investing. Yet many people, still rattled by the recession of 2008, resolutely ignore the advice.

Do you find yourself in the same position -- reticent to act, perhaps because you are still in mourning over some previous loss? Remember that 40 years of statistical data confirm an average annual compounded total rate of return for equities of about 11 percent.

Yes, I am eminently familiar with the statement by famed economist John Maynard Keynes, who pointed out that, "In the long run, we are all dead."

But more pertinent is Chinese philosopher Lao-tzu's advice, which I paraphrase as, every journey begins with a single step.

As Barron's so adroitly went on to write, the shift toward stocks will become more pronounced "when investors realize a secular bull market will be the story for the next three to five years."

It's not that wealth managers are ignoring risk, such as that posed by Europe, our domestic debt crisis or the tensions in the Middle East. But there is a shift toward looking at the glass as half full rather than half empty.

So in addition to cutting back on bonds, many wealth managers are sharply reducing their holdings of cash. One major brokerage house cut its recommended cash position in half to 10 percent, while a major bank reduced client's cash positions to 1 percent from 6 percent.

Although a perennial bull, I fully agree that the tea leaves currently point to equities over fixed income. At the same time, I deny that I only revisit companies for which I have successfully projected annual performance and share-price appreciation.

While I try to only discuss companies where my analysis portends potential capital gains, not every idea is a winner. This was clearly illustrated by my ebullient forecasts versus the historical share price trend of 3M (MMM).

As a result, I resisted further analysis of 3M, relenting two years ago because, as Barron's once pointed out, the world's population continually interacts with the company's products, from fiddling with Scotch tape to leaving urgent messages on Post-it notes. …

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