All three stocks seen below are seen as long term investments. However, if there is a significant pop of 25% plus, I will likely send an alert to sell, especially for the lone growth stock here. Additionally, please remember that these are my opinions, and I am NOT a financial advisor. So make sure to always do your own research, and if needed talk to your own financial advisor. However, I do buy all the stocks I talk about (including the three below on 3/14/2023), and will make sure to send alerts if anything changes with the stocks.
So on to the stocks. Two of our picks today are value stocks, with one being a dividend king for 65 years (and yet risky)! The third pick is also a risky stock, being a bit more of a volatile growth stock, but is in an industry that many people use!
MMM
3M. It’s a company we’ve all heard of, even if we’re not entirely sure what they do. 3M is involved in a variety of industries, from automotive to electronics to healthcare, and create products across that spectrum. You may think of sandpaper and sticky notes, or most recently, face masks. But they also make dental implants, insulation, air filters, and the list goes on! So they must be pretty insulated from any one industry failing, and are therefore a relatively safe investment, right?
Think again. There is currently an incredibly expensive legal battle going on over 3M earplugs that potentially affected the hearing of military members, with the plaintiffs suing that the earbuds did not do their job. In mid-2022, the Wall Street Journal estimated that there could be billions paid out if 3M loses, according to Miller and Zois. However, 3M has potentially already started planning far ahead for this, pushing the subsidiary that created the earbuds into bankruptcy and setting aside a billion dollars to pay out, per the Motley Fool.
So, with this risk in mind, what could happen? It seems like, worst case, once a decision is ultimately made, that the dividend might go away for a little while. However, that would be a big jump for a company that has paid (and raised!) its dividend for 65 years! But another not-so-great option would be if this court case continues to go on and on and on, driving the share price lower and lower. So even if the judge rules against 3M, it would probably be better for the company to get it over sooner than later.
Sure, that all sounds gloomy, and sure seems far too risky to invest in without knowing the results of the case. But with the valuation driven down to levels not seen since 2013, a P/E ratio of just over 10, and a reputable brand like 3M with a diverse range of products, is this a risk worth taking?
Due to these positive factors, as well as this being a value (and dividend king) company I know well, I decided to open a small position.
KDP
Keurig and Dr. Pepper are two well known brands. Who knew that they had combined? I sure didn’t until they popped up on my Finviz scan! But apparently it happened way back in 2018! KDP popped up on my scan due to the millions of dollars of shares bought within the last month by their CFO. It is another dividend paying stock (or a value stock), as well as being more cyclical. However, this is a lot safer play, in my opinion, than the other two stocks here.
The big risk I see is the competition, specifically in regards to financials. While KDP has a P/E ratio of 34.3, Coca-Cola (KO) has a P/E of only 27.4. So would Coca-Cola be a better option? Potentially, but KDP has also had much more of a selloff this past year than Coca-Cola. While I may also invest in KO, for now I am just sticking to a small position in KDP.
CHWY
Chewy (CHWY) is another risky play, but it appears to be on an uptrend since October of 2022. Additionally, it is in an arguably recession-proof industry: pet food and products. As we all know, many people nowadays, including myself, treat pets as part of the family. With this in mind, I have opened a small position in this growth stock, and while I’d definitely hold this long term, based on the chart this could be a bit of a swing trade as well.
Remember, all investing carries risk. While some investments, such as 3M, carry more risk than others, it is always safe to manage risk but diversifying your portfolio and only investing what you can afford to lose. But be sure to check out my portfolio of investments thus far on my portfolio page!
https://www.fool.com/investing/2023/02/15/52-week-low-3m-high-yield-buy-stock/
https://www.google.com/finance/