Barbara Noverini: 3M (MMM) suffered some setbacks this quarter as the firm struggled to grow the top line amidst currency headwinds and sluggish economic environments in several of its key geographic markets, such as Western Europe, Latin America, and China. Nevertheless, we believe that the long-term prospects for this wide-moat firm remain bright, and we believe that shares represent a better entry point now than they did even a quarter ago.
At the heart of 3M is an R&D organization that we believe is world class, supporting the creation of strong patents and very strong well-known brands, such as Scotch Tape, Filtrete, and Post-it Notes. These are all intangible assets that we believe serve as the foundation of 3M's wide economic moat.
A centralized R&D function also supports economies of scale, which allow the company to take existing technologies and tweak them in order to provide different uses for customers in various end markets. That allows the firm to spread the cost of innovation across the enterprise.
Finally, switching costs exist in the high percentage of business that 3M has serving original equipment manufacturers. In this part of the business, they provide "spec-in" components for their customers' products to function well. All of these are competitive advantages that we believe will help 3M endure the headwinds that they are facing as the global macroeconomic environment continues to slow down.