3M’s Plan for World Domination

How could 3M perform so well but trade for so little?

That’s what Cramer was wondering on Wednesday, as he continued his series on the stocks that are thriving despite all the talk about the world’s struggling economies. He has already covered Union Pacific and Accenture, and today he turned his attention to 3M , the diversified industrial conglomerate that’s in everything form Scotch tape to computer screen filters to surgical supplies.

Monday’s pre-announcement, where 3M predicted stronger-than-expected sales for Q2, is certainly a reason to feel bullish about this stock, but it’s the new products and new markets that are the wow factor here. As Chairman and CEO George Buckley told an investor meeting yesterday, 3M is experiencing “an absolute forest fire of new innovations” that’s allowing it to take market share and grow sales.

3M has moved into digital signs (a $10 billion market with 9%), water-infrastructure products and services ($2 billion market with 13%), renewable energy ($5 billion market with 35% growth), as well as lithium-ion batteries, mobile video projectors and health-care purification.

“These numbers are incredible, and they’re across the board,” Cramer said, “allowing 3M to keep growing even when everyone else is worried that economies around the world are falling apart.”

The company’s success is the product of a very specific strategy: by “finding the fastest-growing countries and making them grow faster by helping their manufacturers do better,” Cramer said.

3M operates 35 international laboratory sites, which account for 65% of its new products. But not only do these labs figure out how to sell the company’s pre-existing products, but they develop new items for their host countries, including Brazil, Russia, India, China, Poland, Korea, South Africa and Turkey. Hence emerging markets accounting for 32% of sales now, up from just 16% in 1998.

Here’s a fun fact about 3M: It doesn’t accept the limitations of GDP growth in most of these countries. In fact, it’s growing at double whatever the rate of local GDP growth is in each one.

“It’s creating new products and colonizing new markets like no company I have ever seen,” Cramer said. “This business is a well-oiled international machine.”

But somehow the stock itself trades at just 12.8 times 2011 earnings with an 11.7% long-term growth rate.

“That is just way too cheap,” Cramer said.

When this story published, Cramer's charitable trust owned Accenture.

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